July 24 (Reuters) - U.S. investment-grade bond funds and
exchange-traded funds saw massive outflows in the week ended
July 22, as an oil-driven inflation scare pushed Treasury yields
higher and investors cut exposure to fixed-rate corporate debt,
LSEG Lipper data showed.
According to the data, U.S. investment-grade bond funds
recorded $7.1 billion in net outflows during the week, the
largest weekly withdrawal on record, after suffering a record
one-day outflow of $8.2 billion on July 20.
Investment-grade bonds came under pressure from rising
Treasury yields and wider credit spreads, with their longer
maturities and lower coupons making them more sensitive to
interest-rate moves than high-yield debt.
Oil prices have surged nearly 40% this month to cross above
$100 a barrel, fuelled by Houthi attacks on tankers in the Red
Sea and fears of military action against Iran.
The shock has worsened the inflation outlook, prompting
investors to reassess the path of U.S. monetary policy. Traders
more than doubled the implied chance of a Federal Reserve rate
hike at next week's meeting to about one in three, CME Group's
FedWatch tool showed.
The resulting Treasury selloff pushed the benchmark 10-year
yield to its highest since January 2025.
High-yield bond funds, meanwhile, attracted about $534
million, while leveraged-loan funds also saw modest inflows.
High-yield bonds typically offer higher coupons and shorter
maturities, while loans carry floating rates, making both less
exposed to rising government bond yields.
The iShares iBoxx $ Investment Grade Corporate Bond ETF
, which tracks the Markit iBoxx investment-grade
benchmark, has fallen 2.58% so far this month, compared with a
0.93% decline in its high-yield counterpart.