Bond funds are growing increasingly popular
Here is the summary of an article from bloomberg pointing that the amount of money being invested in bond funds is headed to exceed the amount that went into stock funds during the dot com bubble.
- $480.2 billion was invested in bond funds from June 2008 to June 2010, as compared to $496.6 billion from 1999 - 2000.
- Recent rally has pushed U.S. investment grade debt down to a record 3.70% last week.
- The 10 lowest-yielding U.S. Corporate bonds were sold in the past 14 months, with IBM issuing $1.5 billion 3-Yr notes at a record-low 1%.
- Markit CDX North American Investment Grade Index Series 14 (an index that investors use to hedge against losses on corporate debt or speculate on creditworthiness) declined 0.24 bp to 108.76 as of Monday afternoon. Each bp equals $1000 annually on a contract protecting $10 million of debt.
But the questions that arise are, with such low interest rates, are the increased investments sustainable ? Rates are expected to remain low for a while, it is inevitable to rise. For how long can rates be expected to remain low/decrease further before they bounce back ?
Tags: Corporate, bonds, corporate, debt
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