Bond Investors Flock to Local Markets

EM local currency bond funds were responsible for all of the $267m inflow to the broad EM bond fund group last week, according to EPFR Global. EM hard currency bond funds had net outflows. “Investors appear to prefer the local currency funds as dollar weakness provides an incentive to increase exposure to non-USD currencies,” says EPFR. The inflow to EM bond funds was the largest since the second week of June, while in performance terms it was the second best week of the year. By contrast, global bond funds saw $286m pulled out by investors, even though their year-to-date portfolio performance is better than that of EM, says EPFR.