Is the Fixed-Income Market Overheated?
Money-market funds registered outflows of $392 billion over the same period, the company announced Monday. “It was a banner year for bond funds in 2009,” said Sonya Morris, an editorial director at Morningstar [MORN]. “It shows investors felt more comfortable stepping back into the market.” Bond funds accounted for the bulk of mutual-fund inflows, at $357 billion, more than they attracted for the previous five years combined. Weak competition from other income-producing products, such as certificates of deposit and money market funds, explains some of bond funds’ unusual success, but investors’ flight to safety explains much of their appetite for bond funds. Muni funds experienced a similar bump in inflows, bringing in $72 billion, up from their previous high of $21 billion in 2006. All said, bonds have a better story to tell than equities: Bonds have returned 6.15% over the past 10 years, according to Barclays Capital Aggregate Bond Index, results as of Dec. 31, compared to the S&P 50
