Bonds Bounce Back In Fund Flows Data

The week ended October 9th saw relatively large inflows into bond funds and relatively large outflows from equity funds. Across all mutual and exchange-traded funds, equity flows were in the 7th percentile of all readings since 2013, with outflows of $11.5bn. Of that total, $5.8bn was ETFs, with the lion’s share of equity fund outflows coming from domestic funds. As has so frequently been the case lately, bond funds were the exact opposite situation. Total bond fund flows across mutual funds and ETFs meant $5.8bn of new cash on the week, which is in the 64th percentile of all periods. ETFs were relatively stronger, with bond funds drawing $1.9bn of inflows, higher than more than 81% of periods since 2013. Within both ETF and combined mutual and ETF flows, municipal bonds were the standouts, with total flows in the top 10% of all periods. Since 2013, $152bn has flowed into mutual funds and ETFs that own municipal government bonds, with more than $90bn of that coming since the end of 2017. Those flows are very likely being driven by tax-advantaged buying incentivized by the changes to the tax code at the end of 2017 which ended a variety of popular state and local tax deductions. 

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