How Skittish Are Bond Fund Investors?

Given that the 10-year Treasury yield is at 1.68% (as of September 6), it's a reasonable expectation that interest rates are more likely to go up instead of down in the future. High-yield bond fund investors appear to have a steady focus on performance throughout all sorts of different economic...

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Published in:Journal of Financial Planning 2012-11, Vol.25 (11), p.24
Main Author: Riepe, Mark W
Format: Article
Language:English
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Bond funds
Bonds
Correlation analysis
Interest rates
Rates of return
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description Given that the 10-year Treasury yield is at 1.68% (as of September 6), it's a reasonable expectation that interest rates are more likely to go up instead of down in the future. High-yield bond fund investors appear to have a steady focus on performance throughout all sorts of different economic and interest-rate environments. Intermediate-bond fund flows are a more nuanced and confusing story. The full period correlation of 0.10 indicates an extremely mild positive correlation. High-yield returns have been correlated with equity returns in the past. When rates rise, if they are accompanied by a rise in stock prices, it wouldn't be surprising if the final impact on flows is more muted. It's not obvious how to empirically test these propositions, but given the variability in the sub-period results and the low correlation over the full period, it is hard to draw anything definitive from these numbers.
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subjects Bond funds
Bonds
Correlation analysis
Interest rates
Rates of return
title How Skittish Are Bond Fund Investors?
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