Investors pumped the most money into bond funds in 8 months last week as rate-cut expectations rise
- Investors plowed $11 billion into global bond funds last week, according to LSEG data.
- That's the largest inflow global bond funds have seen since April.
Global bond funds saw their biggest weekly inflow in about eight months last week, a sign that investors are plowing cash into parts of the debt market as expectations for rate cuts on the horizon ramp up.
Investors put in a net $11.5 billion into global bond funds in the week ending December 6 Reuters reported, citing LSEG data. That's the largest inflow since April.
European bond funds attracted the majority of the flows, drawing in around $11 billion the past week. Asian bond funds drew in around $1.3 billion, while US bond funds lost a net $2.5 billion.
Global high-yield bond funds, meanwhile, took in $2.38 billion, though government bond funds lost around $1.22 billion.
Those moves come amid growing expectations central bankers will cut interest rates as early as the first quarter of next year, especially in the eurozone. 90% of economists are expecting the European Central Bank to dial back interest rates before July 2024, according to a recent Reuters survey.
Investors are also expecting a rate cut in the US, but have lowered their expectations slightly amid the out look of a higher-for-longer rates regime. Markets are pricing in a 43% chance rates could end up lower than their current level by March of next year, according to the CME FedWatch tool, lower than a 56% chance priced in a week ago.
Meanwhile, Treasury yields ticked higher to 4.2% on Monday. The yield on the key US government bond has plummeted after reaching 5% in October for the first time since 2007.
Lower rates are potentially good news for bond investors, as bond prices are inversely related to bond yields. Last month, US bonds notched their best returns since 1985 as investors priced in lower rates. That rally has potentially more room to run, Bank of America said, which could bring the 10-year yield to its lowest level in nearly two years.