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Bond Funds See Record Outflow in June

About $80 billion left the bond market last month


Bonds Newspaper

New Year

Investor concerns about the future of economic stimulus efforts by the Federal Reserve resulted in an exodus from mutual fund and exchange traded bonds last month.

About $80 billion was withdrawn from bond funds in June. The yield on 10-year U.S. Treasury notes has jumped to 2.5% during the month. Bond market research firm TrimTabs says the rush to leave the bond market could accelerate as investors see the fallout on quarterly statements, CNBC notes.

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In May, investors received their first hint that the Fed might slow its monthly bond-buying program as the economy improved. In June, Fed Chairman Ben Bernanke indicated that he planned to taper economic stimulus this year, sending equities and commodities tumbling on world markets. Equities have since mostly recovered their losses.

According to TrimTabs the extent of bond liquidation by investors is “unprecedented.”

Most economists expected interest rates on 10-Year U.S. Treasury notes to rise further in the coming months as investors recalculate economic risk levels.

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