Lipper U.S. Weekly FundFlows Insight Report: Taxable Bond Funds Drive Overall Net Inflows for the Week

Lipper’s fund asset groups (including both mutual funds and ETFs) had net positive flows of $3.6 billion for the fund-flows trading week ended Wednesday, June 19. Taxable bond funds paced the weekly intake with positive net inflows of $7.2 billion. This marked the group’s second straight weekly net inflow of greater than $7.0 billion—the last two weeks have been the taxable bond fund group’s largest weekly net inflows since taking in $8.4 billion for the fund-flows week ended January 9, 2019. Municipal bond funds also contributed to the net inflows with a net positive flow of $856 million (the groups’ twenty-fourth consecutive weekly net inflow), while equity funds (-$3.7 billion) and money market funds (-$798 million) both saw money leave their coffers.

Market Overview

The equity market indices were up last week, paced by the NASDAQ Composite Index (+$2.50%), while the Dow Jones Industrial Average and S&P 500 Index posted increases of 1.92% and 1.62%, respectively. All three of the indices captured their gains at the tail-end of the fund-flows trading week on the strength of a couple of pieces of news. First, there was promising news on the U.S./China trade war front as U.S. Trade Representative Robert Lighthizer told Congress that he would be speaking with China’s chief negotiator twice in the next two weeks (once by phone and once in person) in hope of reaching an agreement. Second, the Federal Reserve indicated that it could reduce interest rates by as much as 50 basis points by the end of the year. The Fed stated at the end of its policy meeting this week that this is being considered in response to an expected decrease in inflation and increasing economic uncertainty.

ETFs

The ETF universe had net inflows of $1.7 billion last week as positive net flows from taxable bond (+$2.5 billion) and municipal bond ETFs (+$130 million) outweighed the outflows from equity ETFs (-$902 million). For taxable bond products, the largest net inflows belonged to an investment-grade product (iShares iBoxx $ Investment Grade Corporate ETF [LQD, +$1.1 billion]) and a high yield product (SPDR Bloomberg Barclays High Yield Bond ETF [JNK, +$519 million]). The largest individual net outflows for equity ETFs belonged to iShares MSCI EAFE ETF (EFA, -$2.2 billion) and iShares Core S&P 500 ETF (IVV, -$721 million).

Equity Mutual Funds

Equity mutual funds (-$2.8 billion) suffered their eighteenth straight week of net outflows. Domestic equity funds (-$3.6 billion) were responsible for all of this week’s net outflows, while nondomestic equity funds took in $822 million in net new money. It was the nineteenth straight week of net outflows for domestic equity funds. For the year to date, domestic equity funds and nondomestic equity funds have experienced net outflows of $52.0 billion and $6.8 billion, respectively.

Fixed Income Mutual Funds

Taxable bond funds had net positive flows of $4.7 billion for the week, while municipal bond funds (+$726 million) extended their weekly net inflow streak to 24. The lion’s share of taxable bond fund peer groups took in net new money for the week, with the largest net inflows belonging to Core Plus Bond Funds (+$1.2 billion) and Short Investment-Grade Debt Funds (+$779 million). For muni bond funds, as usual, the national muni peer groups were responsible for the majority of the net inflows, led by the High Yield Muni Debt Funds (+$262 million) and General Muni Debt Funds (+$259 million) peer groups.

Money Market Mutual Funds

After eight straight weekly net inflows, money market funds experienced net outflows of $798 million last week. The largest net outflows among the money market fund peer groups were attributable to U.S. Treasury Money Market Funds (-$1.6 billion), Institutional Money Market Funds (-$1.4 billion), and Institutional U.S. Government Money Market Funds (-$1.0 billion).