Bond funds had enjoyed steady aggregate inflows through 2019, as the continuing bull market in fixed-income securities drew more investors to seek exposure. Then, in March 2020, as the global impact of the coronavirus pandemic suddenly became clear, the bond market descended into turmoil as investors rushed to turn their holdings into cash. Billions flowed out of all kinds of fixed income funds.
In a single week, in March 2020, mutual funds and exchange traded funds that invested in bonds suffered $109bn of outflows — a new record, which was led by the highest-ever weekly outflows from both investment-grade corporate bond funds and specialist junk bond funds.
The outflows soon reversed as investors regained their faith in the relative safety of government and investment-grade corporate debt.