Global Bond Funds See Strong Inflows Amid Rate-Cut Expectations and Middle East Tensions, Reports Reuters

Global bond funds experienced their highest weekly inflow in six weeks for the week ending August 28, driven by increased purchases of government bonds amid expectations of a potential Federal Reserve rate cut in September and ongoing tensions in the Middle East.

Data from LSEG indicates that investors added a net total of $17.69 billion to global bond funds during this week, marking the largest net purchase since July 17.

The two-year U.S. Treasury yield, which often indicates future interest rates, fell by 15.3 basis points last week after Federal Reserve Chair Jerome Powell hinted at upcoming rate cuts, emphasizing that further softness in the job market would be concerning.

U.S. bond funds recorded inflows of $9.58 billion, the highest in six weeks. European and Asian bond funds also saw net purchases of $6.92 billion and $681 million, respectively.

In specific categories, government bond funds attracted net inflows of $5.42 billion, their largest weekly gain since October 2023. Dollar-denominated short-term government bond funds saw a significant influx of $4.99 billion, the highest since mid-March 2023.

High-yield bond funds secured an impressive $2.73 billion, marking the second consecutive week of inflows.

Additionally, global money market funds attracted about $8.18 billion, extending their streak of net purchases to four weeks.

Meanwhile, global equity funds recorded their third consecutive week of inflows, totaling $2.31 billion, following net purchases of roughly $16.28 billion in the previous week.

The financial sector saw notable inflows of $653 million, the largest in five weeks, while the real estate sector posted a gain of $308 million for a third straight week in net purchases.

Gold and other precious metal funds maintained their popularity for a third consecutive week, attracting net inflows of $342 million. Investors also purchased $40 million worth of energy funds, marking a second week of net inflows.

Data covering nearly 30,000 emerging market funds revealed that equity funds experienced outflows for the twelfth consecutive week, totaling a net $419 million. In contrast, bond funds in this sector saw inflows of $1.04 billion, the largest amount in seven weeks.