“Bond Carnage” is the word on The Street

…but unless you’ve been living in a cave, you knew that already.

From Michael Hartnett’s weekly Flow Show report at Bank of America Merrill Lynch:

Fixed Income Flows

Huge $5.3bn outflows from HY bond funds (largest in 12 months)

Huge $1.8bn outflows from bank loan funds (largest in 12 months) (outflows in 19 of past 20 weeks)

$2.2bn outflows from EM debt funds (largest in 15 weeks) (outflows in 20 of 21 weeks)

$3.3bn outflows from IG bond funds (outflows in 4 of past 5 weeks) (2nd biggest in 2 years)

Small $0.3bn outflows from Govt/Tsy funds (outflows in 9 of past 10 weeks)

Munis eke out inflows for 13th straight week (albeit tiny $12mn)

Likewise, TIPS eke out inflows for 5th straight week (albeit tiny $47mn)

Equity Flows

EM: 7 straight weeks of outflows ($1.3bn)

US: $4.2bn outflows (all via mutual funds)

Europe: $0.6bn inflows (smallest in 11 weeks) (inflows in 29 of past 31 weeks)

Japan: $0.3bn inflows (3 straight weeks)

Josh here – Hartnett further notes that there was no accompanying equity panic, just an orderly outflow from mutual funds that slightly swamped the inflow to equity mutual funds ($6.1bn in total outflows comprised of $18.6bn mutual fund outflows and $12.5bn ETF inflows).

So yes, carnage, but confined carnage. And the bond funds had it coming anyway.

Source:

The Flow Show: Bond Carnage
Bank of America Merrill Lynch – December 17th 2015