For the fund-flows week ended January 13, 2021, some investors appeared to be in search of fixed-income securities that were either tied to inflation or adjust for rising yields, while others remained in search of yield. For the flows week, investors injected net new money into taxable fixed income funds (+$9.0 billion, including ETFs) and municipal bond funds (+$2.6 billion).

As had been the case for the entirety of 2020, corporate investment-grade debt funds attracted the lion’s share of estimated net flows this week, taking in $6.9 billion. Flexible funds and international & global debt funds were the runners up, drawing $1.6 billion and $634 million, respectively, during the week.

On the tax-exempt side, municipal bond funds (+$2.9 billion) attracted their third-largest weekly net inflows on record and largest since June 10, 2020. However, investors in search of yield pushed high-yield municipal debt funds to their largest weekly net inflows on record going back to 1992, when Lipper began tracking weekly flows.

Some pundits have espoused the view that inflationary pressures might be here to stay as a result of the lower-than-expected December nonfarm payrolls report and subsequent commitment from President-elect Joe Biden to provide a larger-than-originally anticipated fiscal stimulus package. On January 6, the 10-year Treasury yield moved above the 1.00% mark for the first time since March 19, 2020, ending the most recent fund-flows week at 1.10%.

As a result, Loan Participation Funds (and ETFs, aka bank loan or leveraged loan funds) attracted its largest weekly sum (+$1.1 billion) since March 8, 2017. Interestingly, Loan Participation ETFs—taking in $716 million of that amount—saw its largest weekly net inflows on record dating back to March 9, 2011, when Lipper began tracking weekly flows into the ETF-side of the classification. The primary attractors of ETF investors’ assets during the week were Invesco Senior Loan ETF (BKLN), taking in $392 million, followed by SPDR Blackstone GSO Senior Loan ETF (SRLN), attracting $302 million, and First Trust Senior Loan ETF (FTSL), drawing $31 million.

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On the Short/Intermediate U.S. government & Treasury side of the equation, we saw Inflation-Protected Bond Funds attract a net $1.4 billion, its thirteenth consecutive weekly net inflows. The classification attracted some $20.9 billion in 2020, for its largest one-year net inflows since 2009.

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