A “flight to quality,” triggered by downbeat U.S. employment and housing data and the continuing Greek debt crisis, sent investors out of equities and into Treasuries in May, according a BondDesk Group Market Transparency Report released Tuesday.
Meanwhile, retail investors’ demand for individual municipal bonds began to stabilize in May, BondDesk said in a separate report.
Corporate Bond Activity
BondDesk’s report on retail trades of corporate bonds said that major stock indexes fell 3% to 4% in May, while Treasuries rallied significantly; yields on the 10-year bond fell to nearly 3%. Corporate yields did not fall as far or as fast, but still remained near their 12-month lows, resulting in tepid retail demand for individual bonds.
The report noted the discrepancy between high bond-fund inflows and the low trade volume for individual bonds. Retail investors poured some $21 billion into domestic taxable (corporate) bond funds, the most in the past eight months. “This discrepancy reinforces our view that the retail market for individual bonds is distinctly different from the retail market for bond funds,” the report said.
With rates at historic lows, the report said, the fact that so much money went into funds (the highest total in eight months) suggests that many investors are going to be unhappy when rates turn around.