Earlier this year, investors showed a lot of enthusiasm for
stocks. Global inflows into equity
were up 59.7% in the first two months of this year while inflows
into fixed income ETFs were down 79.7%.
But as the year progressed, the so-called "Great
Rotation"--from bonds to stocks--appeared to be taking much
longer than earlier expected. Though ETF investors showed a clear
preference for equity funds, most mutual fund investors continued
to put money in bond funds as well. Further, most of the money
going into stocks came from the cash lying on the sidelines.
But it appears now that investors are finally ready to dump
bonds as there are renewed concerns that the Fed may be getting
ready to taper off its bond purchases.
Last month, bond markets saw their
ff in the past twenty years. 10 year treasury yield is now at
2.23%, up sharply from 1.67% at the beginning of May. So retail
investors may finally be realizing that the sell-off in bonds
could be real.
, investors pulled out $4.3 billion from bond mutual
funds-third worst outflow on record, and $4.8 billion out of bond
ETFs-the largest outflow largest on record, during the week ended
June 5, 2013.
Interestingly, this money did not go into equity mutual funds,
which saw withdrawal of $769 million while U.S. stock ETFs
attracted inflows of just $161 million.
Do you think that this may be the beginning of the end of 30
year bond market bull run or this sell-off is just another 'false
move' like the one earlier this year?
ISHARS-BR AG BD (AGG): ETF Research Reports
VANGD-TOT BOND (BND): ETF Research Reports
PRO-ULS L20+YRT (TBT): ETF Research Reports
To read this article on Zacks.com click here.