Jan 16, 2020

Investors poured record cash into bonds last week

Expand chart
Data: Investment Company Institute; Chart: Naema Ahmed/Axios

More money flowed into bond funds last week than at any time in at least seven years, data from the Investment Company Institute released Wednesday showed.

Why it matters: The S&P 500 gained 30% last year and the stock market has delivered strong returns so far in 2020, but investors continue to buy safe-haven bonds and sell stocks.

What's happening: ICI representatives say the move likely represents a rebalancing effort by investors after a strong year in equities, but it follows a year in which data showed investors did exactly the same thing.

  • In 2019, ICI reported the largest outflows from equity funds in the history of its data (dating back to 2010), while bond funds saw historic inflows, including an all-time high in municipal bond buying.
  • Lipper, which has data going back to 1992 and tracks more than $40 trillion of assets, also reported record outflows from stocks last year.
  • Money market funds, which are essentially savings accounts, saw holdings swell to levels last seen in 2009, following the global financial crisis.

What it means: Many have worried the market may be getting overconfident and complacent in the face of good news like the signing of the U.S.-China phase one trade deal and an expected resolution for Brexit.

  • However, the numbers show there remains a strong sense of caution running through the market.

Go deeper: The market will need the Fed again in 2020

Go deeper

Gentlemen (and ladies) prefer bonds

Illustration: Aïda Amer/Axios. Photo: Sunset Boulevard/Getty Contributor

After pouring record inflows into bond funds last year, investors are doing so at an even faster pace in 2020 — pushing 10 times more money into bonds than stocks.

By the numbers: More than $65 billion has flowed into bond funds this year, according to Lipper Refinitiv data provided to Axios, outpacing inflows through 2019's record pace when bond funds took in $316 billion.

Treasury yields are sinking toward record lows

Data: FactSet; Chart: Axios Visuals

Those who have bet on fear overtaking the market by piling into U.S. Treasury bonds have been rewarded handsomely so far in 2020, as prices on safe-haven government debt have risen and yields have fallen significantly.

Why it matters: The bond market is sending a clear signal that investors are nervous — tensions continue to ratchet higher in the Middle East, new wrinkles are revealed in President Trump's impeachment trial, and the coronavirus outbreak is claiming more lives.

A historic fortnight of bond buying

Data: Investment Company Institute; Chart: Andrew Witherspoon/Axios

Investors have gotten very bullish in the past two weeks, but it's not stocks they're buying, it's bonds — especially highly rated, low-yielding investment grade corporate bonds.

Why it matters: Unlike in past market rallies when cash flooded into traditionally risky assets like stocks and high-yield bonds, money is flocking to traditionally safe alternatives even after 2019's stellar gains.

Go deeperArrowJan 23, 2020