PLP Advisors, LLC

Financial Advisor Looks at Bond Funds: Is a Mass Exodus Underway

 

Grand Rapids, MI -- (ReleaseWire) -- 07/10/2013 -- In our modern world it can be difficult to stay on top of everything that is happening financially. Dennis Tubbergen, a financial advisor, author, radio show host and CEO of PLP Advisors, LLC can be counted on to give a little help when it comes to understanding the latest events in U.S. and world economics.

Whether people enjoy his monthly newsletter at http://www.moving-markets.com or his blog at http://www.dennistubbergen.com, Tubbergen is dedicated to sharing his viewpoints and opinions. On July 11, his blog was titled Mass Exodus From Bond Funds?

"CNBC reported a record amount of money was pulled from bond funds during the month of June," began Tubbergen. "Bond investors may be nervous after comments made by Federal Reserve Chairman Ben Bernanke that hinted Fed easing could taper."

Below he quotes from the July 1, 2013 CNBC article.

A record amount of money poured out of exchange-traded and mutual bond funds in June, according to a fresh report by TrimTabs, nearly double the amount pulled out of bond funds at the height of the financial crisis in October 2008.

Investor fears over the scaling back of the U.S. Federal Reserve's bond purchasing program has seen the yield on 10-year Treasurys rise sharply to 2.5 percent as $80 billion left bond funds in June, according to the research.

"The herd is scrambling for the exit this month as bond yields back up across the board and central bankers hint that they might provide less monetary stimulus in the future," TrimTabs CEO David Santschi said in a research note on Sunday. "We estimate that bond mutual funds have lost $70.8 billion in June through Thursday, June 27, while bond exchange-traded funds have lost $9.0 billion."

The rush out of bonds could be about to get even worse, according to the research firm, which says that more bond investors could take flight after receiving their quarterly statements in the coming weeks, noticing that their "safe" bond funds are delivering losses instead of gains.

The global sell-off in bonds began on May 22, after the minutes of the Fed's policy meeting signaled that its bond-buying program—which has suppressed yields and boosted stocks—could soon be pared back. Fed Chairman Ben Bernanke echoed that view at a press meeting last Wednesday, suggesting that asset purchases could be scaled back later this year if economic data continued to show improvement.

TrimTabs call the liquidation "unprecedented" after indicating last Monday that bond outflows had already reached records with a figure of $47.2 billion. In just one extra week that number has risen to $79.8 billion which it says is reversing 73 percent of the $109.6 billion inflows seen earlier this year.

"Until last month, investors had been content to shovel huge sums into bonds with little regard for value, confident that endless central bank liquidity would keep prices at ridiculous levels. It was only a few weeks ago that junk bond yields dipped below 5 percent for the first time."

"Investors are moving out of bond funds, but the logical question is: where are they moving?" asked Tubbergen. "Apparently they are moving to cash accounts."

Tubbergen goes on to say that USA Today on June 26, 2013 reported that there was no rotational move into stock funds as the big bond fund exit occurred.

"That’s interesting given that there is no yield in cash accounts," concludes Tubbergen. "Evidently, investor sentiment has investors becoming more risk averse than they are yield seeking. Probably not a bad move given the current set of economic circumstances."

To read the blog in its entirety go to http://www.dennistubbergen.com and select his July 11, 2013 entry.

Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM.

About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at http://www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to http://www.moving-markets.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.