More Bond Fund Inflows Show Investors Aren't Scared of Inflation

Fear is often extinguished when facing it head-on. After a tumultuous 2022, it seems investors are no longer scared of inflation and are piling into bond funds again, based on recent inflows.

“Investors showed ‘no inflation fear’ in the run-up to this month’s key central bank meetings, ploughing money into bonds and stocks in the week to Wednesday, a report from BofA Global Research showed on Friday,” a Reuters report mentioned.

In essence, all asset classes have been benefitting from the recently rally as investors appear unfazed by inflation, thus turning up the risk dial on their portfolios.

“Equity funds got a $16 billion injection while bonds saw inflows of $7.8 billion, BofA said citing EPFR data, as investors showed conviction in both asset classes,” the report added. “In another sign of investors’ confidence that global inflation may have peaked, cash funds saw $300 million in outflows, while gold funds logged outflows of $1.3 billion.”

2 Bond Options for Domestic or International Exposure

To get exposure to the rallying U.S. bond market, consider the Vanguard Total Bond Market Index Fund ETF Shares (BND). As it’s constructed, BND presents bond investors with an all-encompassing, aggregate solution to getting U.S. bond exposure.

BND seeks the performance of the Bloomberg U.S. Aggregate Float Adjusted Index. The index represents a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States, including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than one year.

For a more diversified bond portfolio that includes international debt issues, investors can consider the Vanguard Total International Bond Index Fund ETF Shares (BNDX). BNDX employs an indexing investment approach designed to track the performance of the Bloomberg Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD-hedged), which provides a broad-based measure of the global, investment-grade, fixed-rate debt markets.

BNDX seeks to track the performance of a benchmark index that measures the investment return of non-U.S. dollar-denominated investment-grade bonds. International bonds can provide a diversification tool for fixed income investors looking to supplement their current core portfolios.

For more news, information, and analysis, visit the Fixed Income Channel.