Global bond funds saw the biggest outflows in two decades in the first three quarters of this year as hefty interest rate increases by central banks to tame inflation sparked fears of a recession.
Governments and companies have borrowed heavily in the past few years, taking advantage of ultra-low interest rates, and they now stare at bigger interest liabilities due to a rise in yields.
"The combination of high debt levels and a rise in interest rates has reduced investors' confidence in the government's ability to pay back debt, which has resulted in the massive outflows we are seeing," said Jacob Sansbury, CEO at Pluto Investing.
He added that outflows from bond funds might continue into 2023, as a reduction in interest rates and reduced debt loads are unlikely.
Emerging market bonds faced an outflow of about $80 billion in the first three quarters of this year, while U.S. high yield bonds and inflation-linked bonds witnessed net sales of $65.81 billion and $16.44 billion, respectively.
These excerpts originally appeared on Reuters: https://www.reuters.com/markets/europe/global-markets-flows-2022-10-05/