'Unprecedented' $80 Billion Pulled From Bond Funds = ?

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'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby LH » Mon Jul 01, 2013 7:52 pm

http://www.cnbc.com/id/100855508

When its said that 80 billion flowed from bond funds..... I do not know the overall significance of that.

For every seller, there is a buyer.

so if 80 billion dollars was pulled out of bonds funds by selling, 80 billion dollars worth of bonds had to be BOUGHT simultaneously.

So basically, 80 billion dollars of bonds left funds, and then went to individuals/companies/whoever/whatever that bought them from the people who sold them for 80 billion?

One could turn it around and say, institutional investors (just for purposes of discussion) just acquired 80 billion dollars of bonds, aka an 80 Billion dollar inflow, and one would be saying the same thing right?

Or am I missing something, and if so what?

Thanks,

LH
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Toons » Mon Jul 01, 2013 7:58 pm

Hey include me as a buyer :sharebeer ,,,,I bought 2k worth of bonds last week
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Ged » Mon Jul 01, 2013 8:02 pm

LH wrote:http://www.cnbc.com/id/100855508

When its said that 80 billion flowed from bond funds..... I do not know the overall significance of that.

For every seller, there is a buyer.

so if 80 billion dollars was pulled out of bonds funds by selling, 80 billion dollars worth of bonds had to be BOUGHT simultaneously.

LH


Selling bonds is not the same thing as selling shares in bond funds.

Suppose you own 80 Shares of Ged's Super Duper Bond Fund (GSDBF).

You sell these shares. Their NAV is 1 Billion each.

Ged's then sells the bonds underlying the shares of GSDBF you sold to raise the money to pay you. The result is the assets of the GSDBF are now smaller by 80 billion.

That reduction of the assets in GSDBF is what they are talking about.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Kalo » Mon Jul 01, 2013 8:13 pm

Ged wrote:
LH wrote:http://www.cnbc.com/id/100855508

When its said that 80 billion flowed from bond funds..... I do not know the overall significance of that.

For every seller, there is a buyer.

so if 80 billion dollars was pulled out of bonds funds by selling, 80 billion dollars worth of bonds had to be BOUGHT simultaneously.

LH


Selling bonds is not the same thing as selling shares in bond funds.

Suppose you own 80 Shares of Ged's Super Duper Bond Fund (GSDBF).

You sell these shares. Their NAV is 1 Billion each.

Ged's then sells the bonds underlying the shares of GSDBF you sold to raise the money to pay you. The result is the assets of the GSDBF are now smaller by 80 billion.

That reduction of the assets in GSDBF is what they are talking about.


Then who bought the bonds that Ged's sold? Is there any reason to think they were retired? Just wondering about this and not sure of the answer. I know that companies sometimes buy in their stock and can either put it in their "treasury" or retire them. Assuming this can also be done with bonds but not sure if corporations do that unless it's a callable bond.

I do understand that there must be a supply and a demand for debt and that bonds are maturing all the time. So I would think that if issuers cut back on issuing, that the supply would go down, and that if interest rates rise, it would be more expensive to issue debt and that therefore the supply may shrink for that reason.

I guess I'm partly just thinking out loud. It is complicated to me.

If you took all the economists in world and laid them end to end, they still wouldn't reach a conclusion (not sure who originally said this or I would give them credit).

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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby CaliJim » Mon Jul 01, 2013 8:13 pm

LH wrote:One could turn it around and say, institutional investors (just for purposes of discussion) just acquired 80 billion dollars of bonds, aka an 80 Billion dollar inflow, and one would be saying the same thing right?
Or am I missing something, and if so what?


Yeah. I understand your POV. Buyers = Sellers.

But what they are saying is not without meaning. I think what they are saying is that bond mutual funds had net redemptions, meaning, individual investors are getting out of bond funds.

It is pretty cool that the market is liquid enough to absorb this without too much trouble.

Institutions (define?) may have acquired considerably MORE, net of dispositions, than $80B in bonds they bought from bond funds, if you count bonds bought from banks, broker/dealers, corporations, hedge funds, mutual funds, etfs, individuals, foreign governments.

The bond market is big.

Too bad there isn't the same level of transparency as in the stock market with regard to trading volumes and such, but it is what it is.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby joe8d » Mon Jul 01, 2013 8:20 pm

I bought 17k of STIG last Monday.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Ged » Mon Jul 01, 2013 8:21 pm

Kalo wrote:Then who bought the bonds that Ged's sold? Is there any reason to think they were retired?
Kalo


Who bought them doesn't matter. GSDBF has 80 billion less assets. So long as they weren't bought by another bond fund the total bond fund outflow from this transaction was 80 billion.

Some of the bonds could be retired, but if a bond fund retires a bond it will generally take the principal from the final payment and buy a new bond to keep its investments in bonds constant.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby LadyGeek » Mon Jul 01, 2013 8:48 pm

Kalo wrote:If you took all the economists in world and laid them end to end, they still wouldn't reach a conclusion (not sure who originally said this or I would give them credit).


"If all the economists were laid end to end, they'd never reach a conclusion." is attributed to George Bernard Shaw

(After some searching - Google Search)
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby LH » Tue Jul 02, 2013 3:26 pm

Ged wrote:
LH wrote:http://www.cnbc.com/id/100855508

When its said that 80 billion flowed from bond funds..... I do not know the overall significance of that.

For every seller, there is a buyer.

so if 80 billion dollars was pulled out of bonds funds by selling, 80 billion dollars worth of bonds had to be BOUGHT simultaneously.

LH


Selling bonds is not the same thing as selling shares in bond funds.

Suppose you own 80 Shares of Ged's Super Duper Bond Fund (GSDBF).

You sell these shares. Their NAV is 1 Billion each.

Ged's then sells the bonds underlying the shares of GSDBF you sold to raise the money to pay you. The result is the assets of the GSDBF are now smaller by 80 billion.

That reduction of the assets in GSDBF is what they are talking about.


Well, they are talking aggregate reduction of bonds in all bonds funds.

But the bonds were just bought by someone else. The net amount of bonds is constant (given the normal backround of new bonds/retiring bonds that is always ongoing).

So just the fact that the net amount of bonds in bond funds decreases, just means the bonds held by non bond funds increases by the same amount.

Ego, no "money on the sidelines" or more money parked in cash...

net, there is no real change taking place that I can tell.

There is no flow from bonds to cash/stocks/farmland/tulip bulbs occuring.

The only flow is from people holding bonds in bond funds, to people holding bond outside of bond funds..............

So basically, I posit the title of the article should be held for clarity purposes should read:

'Unprecedented' $80 Billion Pulled From Bond Funds and instead held as 80 billion dollars of bonds outside of a bond fund.

My central question is, so what?

I think the common implication that is taken, is money has LEFT bonds, for something else, which has not occurred. Its just a buy sell exchange. 80 billion taken from bond funds, and 80 billion placed in bonds outside of bond funds. again, unless I am missing something.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby umfundi » Tue Jul 02, 2013 4:02 pm

How about: Interest rates went up, the NAV of bond funds went down.

Bond funds now hold $80B less, due to the drop in NAV. No one sold anything.

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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Van » Tue Jul 02, 2013 4:12 pm

umfundi wrote:How about: Interest rates went up, the NAV of bond funds went down.

Bond funds now hold $80B less, due to the drop in NAV. No one sold anything.

Keith


I think Keith may be on to something. Although the drop in NAV might not explain all of the $80B, it might explain a significant portion of it.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Kevin M » Tue Jul 02, 2013 4:24 pm

I don't think the article was talking about the drop in values, but actual outflows; i.e., the value of shares sold. For some reason, fund inflows and outflows seem interesting to people--I guess as an indicator of retail investor sentiment. The article mentions a drop in NAV for a PIMCO bond fund further down.

I contributed to bond fund outflows not long ago when I sold all of my STIG and half of my ITIG to buy another CD, but I did it after values had gone up, not after they had gone down.

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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby arcticpineapplecorp. » Tue Jul 02, 2013 8:08 pm

And more money left the stock market in 2012 than went into the stock market...and that didn't stop the (U.S.) stock market from going up 16% in 2012.

the takeaway...who knows what will happen? And who cares? Make sure you're properly diversified, have a portfolio that will meet your need for growth and matches your risk tolerance and then just stay the course. The rest is just noise.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby mike143 » Tue Jul 02, 2013 8:37 pm

The market swings don't worry me. Even if my investments ebb and flow, at least I am not in debt up to my eyeballs.

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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby abuss368 » Tue Jul 02, 2013 10:32 pm

Exactly. I say keep selling. I will gladly buy them.

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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby nedsaid » Tue Jul 02, 2013 11:55 pm

Amazing!! You can count on the individual investor to do the wrong thing at the wrong time.

Funny, but I noticed that my bond funds have been rebounding the last few days. Just as people are pulling money out!! I am in there buying bonds. Not big amounts but trying to keep my asset allocation from getting out of whack.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby stilts1007 » Wed Jul 03, 2013 12:36 am

I sold 10k in Vanguard TBM on Friday, therefore I must have been the one to start the avalanche.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby gnav » Wed Jul 03, 2013 2:00 am

The global bond market totals about $100 trillion, roughly twice the size of the stock market.
http://www.thecityuk.com/assets/Uploads ... 012-F1.pdf

Daily trading volume for the US bond market alone is +- $800 billion.
http://en.wikipedia.org/wiki/Bond_market

So for June, $80 billion, assuming just US, would represent 0.5 percent of $16 trillion traded.
Insignificant I'd say.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 11:43 am

Think about the bond market structure and the securities and derivatives that make it up.

1) Bond funds cannot be 100% invested in bonds. They must keep cash in order to handle flows. Typically a fund keeps 1-5% in cash.
2) Many bond funds use derivatives: Treasury Futures, CDS.
3) Bonds don't trade on an exchange like stocks. If a bond fund wants to sell bonds, usually a dealer must buy them. I would argue that a dealer owning bonds is not the same as an investor holding bonds. Moreover, if a dealer ends up with a ton of corporate bonds, the dealer will use derivatives: CDS, CDX, S&P futures,etc to hedge this.
4) While this selling is not important relative to the bond market as a whole, it is significant when you look at the typical monthly flows. 80bn IS a lot on a marginal basis.
5) Primary issuance has dropped considerably recently as the demand for paper is lower.

So, funds now hold extra cash, dealers now have less capacity to buy as their balance sheets are filled, and their is increasing demand by corporations for funding. This just implies greater weakness and more supply overhang in the market.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby dm200 » Sun Jul 07, 2013 12:27 pm

I finally got around to reading the referenced article. To me, at least, the article seems to intertwine bond fund redemptions and the drop in bind values due to increased rates - two different things IMO.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 12:34 pm

dm200 wrote:I finally got around to reading the referenced article. To me, at least, the article seems to intertwine bond fund redemptions and the drop in bind values due to increased rates - two different things IMO.



well, the two are related. Prices and yields are directly related, and prices don't go down without selling
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby umfundi » Sun Jul 07, 2013 1:05 pm

muntz wrote:
dm200 wrote:I finally got around to reading the referenced article. To me, at least, the article seems to intertwine bond fund redemptions and the drop in bind values due to increased rates - two different things IMO.



well, the two are related. Prices and yields are directly related, and prices don't go down without selling

Yes, but the article seems to conflate change in total assets a being perhaps a result of outflows, or perhaps a change in asset value.

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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby dm200 » Sun Jul 07, 2013 3:10 pm

muntz wrote:
dm200 wrote:I finally got around to reading the referenced article. To me, at least, the article seems to intertwine bond fund redemptions and the drop in bond values due to increased rates - two different things IMO.



well, the two are related. Prices and yields are directly related, and prices don't go down without selling


Yes, prices and yield are directly related. However, my point is that net outflows or net inflows of bond funds is a separate issue from change in bond values due to rate changes. "$80 Billion Pulled from Bond Funds" to me means that there was a net outflow of $80 Billion from Bond Funds, in that Sales of Bond Funds were $80 Billion more than Purchases of Bond Funds. That was not clear (to me) from reading the article itself. Money could also very well flow from bond funds when interest rates drop and bond values increase.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 4:10 pm

dm200 wrote:
muntz wrote:
dm200 wrote: "$80 Billion Pulled from Bond Funds" to me means that there was a net outflow of $80 Billion from Bond Funds, in that Sales of Bond Funds were $80 Billion more than Purchases of Bond Funds. That was not clear (to me) from reading the article itself. Money could also very well flow from bond funds when interest rates drop and bond values increase.



Yes - 80billion left bond funds. but, how could bonds go down (rates go up) if there was no selling?

consequently, I seriously doubt you'd see a rally in prices when demand drops.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 4:13 pm

umfundi wrote:
muntz wrote:
dm200 wrote:I finally got around to reading the referenced article. To me, at least, the article seems to intertwine bond fund redemptions and the drop in bind values due to increased rates - two different things IMO.



well, the two are related. Prices and yields are directly related, and prices don't go down without selling

Yes, but the article seems to conflate change in total assets a being perhaps a result of outflows, or perhaps a change in asset value.

Keith



selling = lower asset value. keep it simple. Lower demand without lower supply = lower prices (higher rates). what comes first is relatively irrelevant.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby umfundi » Sun Jul 07, 2013 4:37 pm

muntz wrote:
umfundi wrote:
muntz wrote:
dm200 wrote:I finally got around to reading the referenced article. To me, at least, the article seems to intertwine bond fund redemptions and the drop in bind values due to increased rates - two different things IMO.



well, the two are related. Prices and yields are directly related, and prices don't go down without selling

Yes, but the article seems to conflate change in total assets a being perhaps a result of outflows, or perhaps a change in asset value.

Keith



selling = lower asset value. keep it simple. Lower demand without lower supply = lower prices (higher rates). what comes first is relatively irrelevant.

Not at all. We are talking about a bond fund.

Case 1. Rates go up, the price of bonds fall. The net cash flow of the fund is zero, but the total market value of the fund drops.

Case 2. Rates are unchanged, the fund receives many more withdrawals than deposits. (They have cash to cover the difference, so they are not trading.) The total market value of the fund drops by the difference between inflow and outflow.

Case 1 and Case 2 can occur independently. The way the paper is written, they are implying case 2, but I suspect case 1 is (by far) the bigger effect.

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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 5:38 pm

umfundi wrote:
muntz wrote:
umfundi wrote:
muntz wrote:
dm200 wrote:I finally got around to reading the referenced article. To me, at least, the article seems to intertwine bond fund redemptions and the drop in bind values due to increased rates - two different things IMO.



well, the two are related. Prices and yields are directly related, and prices don't go down without selling

Yes, but the article seems to conflate change in total assets a being perhaps a result of outflows, or perhaps a change in asset value.

Keith



selling = lower asset value. keep it simple. Lower demand without lower supply = lower prices (higher rates). what comes first is relatively irrelevant.

Not at all. We are talking about a bond fund.

Case 1. Rates go up, the price of bonds fall. The net cash flow of the fund is zero, but the total market value of the fund drops.

Case 2. Rates are unchanged, the fund receives many more withdrawals than deposits. (They have cash to cover the difference, so they are not trading.) The total market value of the fund drops by the difference between inflow and outflow.

Case 1 and Case 2 can occur independently. The way the paper is written, they are implying case 2, but I suspect case 1 is (by far) the bigger effect.

Keith


again - you are talking about rates going up as if something magical happens - that has nothing to do with supply and demand. Rates ONLY go up when prices to down. Prices ONLY go down when demand decreases relative to supply.
Last edited by muntz on Sun Jul 07, 2013 5:57 pm, edited 1 time in total.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby billyt » Sun Jul 07, 2013 5:42 pm

yes, the prices of bonds are set by supply and demand, as are interest rates.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby dm200 » Sun Jul 07, 2013 6:15 pm

muntz wrote:
dm200 wrote:
muntz wrote:
dm200 wrote: "$80 Billion Pulled from Bond Funds" to me means that there was a net outflow of $80 Billion from Bond Funds, in that Sales of Bond Funds were $80 Billion more than Purchases of Bond Funds. That was not clear (to me) from reading the article itself. Money could also very well flow from bond funds when interest rates drop and bond values increase.



Yes - 80billion left bond funds. but, how could bonds go down (rates go up) if there was no selling?

consequently, I seriously doubt you'd see a rally in prices when demand drops.


The inflow or outflow of funds in a bond fund, as best I understand, has little direct impact on the price of bonds. it is, rather, the bond market itself that sets the price/rate. Supply and demand as it relates to a particular bond fund does not set the NAV of the bond fund; it is the overall bond market. if I am reading some of the many posts about bond funds, I think some are of the belief that it is buying and selling (supply and demand) of bond funds that sets the price (NAV) of the bond fund - and that is just not true.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 7:38 pm

ah. i see what you are saying. And you make a good point. Retail investors are only part of the bond market - insurance companies, pension funds, sovereigns, etc, also play in the bond market and are not represented in this number.

Of course it is true that $1 leaving a bond fund has no direct impact on the prices of the underlying securities.

My point is that $80bn is a lot of money. If that amount exits the bond market it will have an effect - indirectly, but it will have an effect. Funds will increase cash by selling/not buying, there'll be little desire to "bid up" paper, etc.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Jack » Sun Jul 07, 2013 8:01 pm

muntz wrote:My point is that $80bn is a lot of money. If that amount exits the bond market it will have an effect - indirectly, but it will have an effect.

The U.S. bond market is over $35 trillion. $80 billion is 0.2% of the market. Do you think anyone would notice other than a few bond fund managers who might see a ding to their annual bonus for assets under management?
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 8:08 pm

Jack wrote:
muntz wrote:My point is that $80bn is a lot of money. If that amount exits the bond market it will have an effect - indirectly, but it will have an effect.

The U.S. bond market is over $35 trillion. $80 billion is 0.2% of the market. Do you think anyone would notice other than a few bond fund managers who might see a ding to their annual bonus for assets under management?


yes. yes i do.

here's a question that i do not have the answer to - what is the monthly VOLUME of the bond market - what is the amount bond funds typically buy or sell in a month?

I do know that dealer inventories of corporate bonds longer than 1yr is around $11-13bn. Imagine if these dealers were asked to buy 7 times their total inventory?

Moreover, total return managers are approximately 1/2 the volumes of the bond market.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby dm200 » Sun Jul 07, 2013 8:33 pm

Vanguard's Total Bond Index Fund (all classes) has net assets (according to the web site) of $115.2 Billion. That is just ONE fund of ONE company. The way I read the 12/31/12 annual report, net purchases in 2012 were about $15 Billion. With these kinds of numbers, again just from one fund from one company, to me the $80 Billion does not look that big.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Jack » Sun Jul 07, 2013 8:39 pm

muntz wrote:
Jack wrote:
muntz wrote:My point is that $80bn is a lot of money. If that amount exits the bond market it will have an effect - indirectly, but it will have an effect.

The U.S. bond market is over $35 trillion. $80 billion is 0.2% of the market. Do you think anyone would notice other than a few bond fund managers who might see a ding to their annual bonus for assets under management?


yes. yes i do.

here's a question that i do not have the answer to - what is the monthly VOLUME of the bond market - what is the amount bond funds typically buy or sell in a month?

The average daily bond trading volume is about $850 billion, so in a month about $17 trillion is traded. $80 billion is less than a half percent of the volume. Do you still think anyone noticed other than the bond fund managers worried about their bonuses?

Added -- some interesting factoids:
Of the daily volume
66% Treasuries
28% Mortgage backed securities
2% Corporate bonds
1% Municipal bonds
Last edited by Jack on Sun Jul 07, 2013 8:52 pm, edited 1 time in total.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 8:51 pm

Jack wrote:
muntz wrote:
Jack wrote:
muntz wrote:My point is that $80bn is a lot of money. If that amount exits the bond market it will have an effect - indirectly, but it will have an effect.

The U.S. bond market is over $35 trillion. $80 billion is 0.2% of the market. Do you think anyone would notice other than a few bond fund managers who might see a ding to their annual bonus for assets under management?


yes. yes i do.

here's a question that i do not have the answer to - what is the monthly VOLUME of the bond market - what is the amount bond funds typically buy or sell in a month?

The average daily bond trading volume is about $850 billion, so in a month about $17 trillion is traded. $80 billion is less than a half percent of the volume. Do you still think anyone noticed other than the bond fund managers worried about their bonuses?



Average monthly volume according to SIFMA is ~880mm. Im not clear how much of this is dealer-to-dealer but suspect that at least half is. but assume that zero is - now we are 10% of total volumes. http://www.sifma.org/research/statistics.aspx

Oh - and lets not forget that bond prices dropped in June. If you tell me that a price of something is lower, i'd guess that there was some selling going on and vice versa and that is exactly what happend.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby Jack » Sun Jul 07, 2013 8:56 pm

muntz wrote:
Jack wrote:
muntz wrote:
Jack wrote:
muntz wrote:My point is that $80bn is a lot of money. If that amount exits the bond market it will have an effect - indirectly, but it will have an effect.

The U.S. bond market is over $35 trillion. $80 billion is 0.2% of the market. Do you think anyone would notice other than a few bond fund managers who might see a ding to their annual bonus for assets under management?


yes. yes i do.

here's a question that i do not have the answer to - what is the monthly VOLUME of the bond market - what is the amount bond funds typically buy or sell in a month?

The average daily bond trading volume is about $850 billion, so in a month about $17 trillion is traded. $80 billion is less than a half percent of the volume. Do you still think anyone noticed other than the bond fund managers worried about their bonuses?



Average monthly volume according to SIFMA is ~880mm.

Nope, you misread that. That is daily volume averaged over a month, not monthly average volume. Monthly volume is over $17 trillion.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 9:05 pm

[/quote]Average monthly volume according to SIFMA is ~880mm.[/quote]
Nope, you misread that. That is daily volume averaged over a month, not monthly average volume. Monthly volume is over $17 trillion.[/quote]

right. sorry. it is still a ton of interest leaving the market. another story on my point. http://www.reuters.com/article/2013/03/ ... WR20130322
muntz
 
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Sun Jul 07, 2013 9:06 pm

but. i'm done w/this now. i'm not gonna convince you and it doesn't really matter anyway.
muntz
 
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby billyt » Mon Jul 08, 2013 7:32 am

I guess people must find some value in these flow numbers, but I am not sure these are market movers. OK, investors pulled $80 billion from bond funds. Where did that money go? Maybe all these folks are following Suze Orman and buying individual bonds. No impact on the bond market. Maybe they put it in Ally Bank earning 0.85%. Then Ally invests the cash in 10 year treasurys at 2.7%. No impact on the bond market. Who bought the bonds that the bond funds sold to cover redemptions. Somebody did. Yes, interest rates are rising and bond prices are falling. On some fundamental level, there is less demand or more supply of bonds. Is that because of the $80 billion exchanged? Impossible to say.
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Re: 'Unprecedented' $80 Billion Pulled From Bond Funds = ?

Postby muntz » Tue Jul 09, 2013 8:16 pm

Just saw a report from Barclays that shows - in fact - that fund flows have no relation to the IG index performance (0.6 R-Squared). Y'all were right!

Interestingly - HY Fund Flows are correlated. (.5 R-Squared)

Reasons for this include: HY is more of a retail product while IG is more institutional: Pension funds, Insurance Companies, Sovereigns, etc.
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