Talking PointFeb 8 2023

Fixed income funds saw second highest inflow on record in January

Supported by
Schroders
twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Supported by
Schroders
Fixed income funds saw second highest inflow on record in January
Dovish comments from Andrew Bailey, the BOE governor, have raised hopes that the UK’s rate-tightening cycle is at or near its peak.(Yui Mok/Pool via Reuters)

Fixed income funds had a very strong January, as investors added £1.23bn to their portfolios - the second-largest net inflow to bond funds since record inflows of £1.57bn in May 2018, according to data from Calastone's latest fund flow index. 

Over the last twelve months, inflows to bond funds have totalled £3.84bn, while equities have shed a net £6.62bn over the same period.

Edward Glyn, managing director - head of global markets at Calastone, added: “Fixed income certainly looks much attractive today. Bonds are now offering the best yields in over a decade and this is clearly tempting investors keen to lock them in. Central banks are still raising policy rates, though dovish comments from the governor of the Bank of England have also raised hopes that the UK’s rate-tightening cycle is at or near its peak.

"The developing slowdown in the economy and moderating inflation are also likely to push market interest rates lower in the months ahead. All this could signal capital gains to bondholders over time too.

Glyn added the bonds most in favour in January, were tilted to the higher quality end of the market – sovereign or investment grade corporate debt – suggesting investors were content to sidestep riskier high-yield corporate bonds at present.