Arabian Post Staff -Dubai
Investors have funneled a record $600 billion into global bond funds in 2024, capitalizing on some of the highest yields in decades. This marks a significant reversal from 2022, when $250 billion exited fixed-income funds.
The ICE BofA global bond index now offers yields exceeding 4.5%, the highest since 2008. This surge is attributed to easing inflation and central banks reducing interest rates, enhancing the appeal of bonds. Developed and emerging market bond funds have collectively attracted $617 billion by mid-December.
Corporate bonds have been particularly attractive, offering higher yields than government debt. Investors have shown a preference for passive exchange-traded funds (ETFs), with industry leaders BlackRock and Vanguard leading inflows. This trend is supported by companies effectively managing rising borrowing costs, making corporate bonds a favorable option.
However, the momentum of these inflows may decelerate in 2025. Equity markets have experienced gains, spurred by President-elect Trump’s policies, leading to substantial inflows into U.S. stock funds. Additionally, there is skepticism regarding the potential for further improvements in corporate bond performance.
In the ETF sector, U.S.-listed funds have achieved inflows nearing $910 billion, positioning them for a record year, potentially surpassing $1 trillion. This growth is driven by increased investor interest in actively managed fixed-income ETFs, with record inflows expected to push the industry towards a historic milestone.
The inclusion of Indian sovereign bonds into JPMorgan’s emerging markets index has also contributed to the global bond market dynamics. This move is expected to bring billions of dollars in foreign inflows, further integrating India into global financial markets.
Similarly, South Korea’s anticipated inclusion in FTSE Russell’s World Government Bond Index is projected to attract substantial investment inflows, potentially amounting to 80 trillion won ($59.7 billion) over the coming years. This development is expected to support the nation’s bond market and strengthen the South Korean won.
Despite these positive trends, certain sectors have experienced outflows. For instance, global money market funds saw substantial inflows of $127.44 billion in the week leading up to November 6, due to investor caution around the U.S. presidential election and the Federal Reserve’s policy meeting. However, investors sold off $649 million in gold and other precious metal funds during the same period.
