10 Jun 2013
Sharp selling in US bond funds hints at high volatility to stay
FXstreet.com (Barcelona) - In a Financial Times report directly linked with an earlier article on FXstreet.com, in which Marc Candler from BBH raises the prospects of the end of a low rates environment, the British newspaper highlights a "record $12.5bn outflows from bond funds" last week alone, a headline that speaks by itself.
From the FT: "Investors pulled a record $12.53bn out of global bond funds in the past week, beating a speedy retreat from fixed income holdings that can fall in value as interest rates rise. EPFR Global, the research firm, said the selling wave swept across all major classes of bond fund, including $6bn of outflows from junk bonds funds and $1bn from emerging markets funds."
The FT article goes on saying that 2/3 of the withdrawals were on US funds, as possibilities over a possible Fed QE tapering continues to be priced in. Bond valuations move inversely to interest rates.
As a representative example of the bond sector, the benchmark Barclays US Aggregate index - a basket of Treasury, mortgage and corporate debt - registered the poorest YTD performance since 1994, the Financial Times explained.
Whether the Fed helps to clear up the picture in the next few month or leaves the market guessing without much further clues, what seems clear is that the lack of consensus on the QE strategy outcome may keep volatility at high levels, a factor that will help traders to find more trading opportunities.
From the FT: "Investors pulled a record $12.53bn out of global bond funds in the past week, beating a speedy retreat from fixed income holdings that can fall in value as interest rates rise. EPFR Global, the research firm, said the selling wave swept across all major classes of bond fund, including $6bn of outflows from junk bonds funds and $1bn from emerging markets funds."
The FT article goes on saying that 2/3 of the withdrawals were on US funds, as possibilities over a possible Fed QE tapering continues to be priced in. Bond valuations move inversely to interest rates.
As a representative example of the bond sector, the benchmark Barclays US Aggregate index - a basket of Treasury, mortgage and corporate debt - registered the poorest YTD performance since 1994, the Financial Times explained.
Whether the Fed helps to clear up the picture in the next few month or leaves the market guessing without much further clues, what seems clear is that the lack of consensus on the QE strategy outcome may keep volatility at high levels, a factor that will help traders to find more trading opportunities.