EPFR Global reports slight inflow for EM bond funds in week ending Feb. 7, but IIF tracks outflows

By Rebecca Melvin

New York, Feb. 8 – Emerging market bond flows remained slightly positive, with a modest $20 million inflow for the week ended Feb. 7, according to data tracker EPFR Global on Thursday.

Further details were not immediately available.

It was a “very small inflow,” EPFR’s Cameron Brandt said via email. But the data contrasted with that of the Institute of International Finance, which showed another $600 million outflow in emerging market debt on Feb. 6-7, which was on top of an outflow of $500 million to $600 million in the emerging market bond space between Jan. 30-Feb. 5, according to an IIF analyst.

The emerging market equity outflow was $1.9 billion over the course of Feb. 6-7 and for the week following Jan. 30 the emerging market equity outflow was $4 billion.

“It’s definitely not the magnitude or severity of equity outflows but it’s still getting dragged downwards,” the IIF analyst said regarding EM debt.

The IIF data tracks movement of hedge funds and pension funds, which EPFR Global does not.

The broader markets have hit a patch of severe turbulence that left U.S. equity indexes in correction territory, or down 10%, at the end of trading on Thursday Bond yields have been volatile, with the yield on the 10-year U.S. Treasury benchmark reaching as high as 2.88% during Thursday’s session before settling around 2.82%.

The IIF outflows follow a stellar January in which $16.5 billion flowed into EM debt markets and about $14.5 billion flowed into emerging market equities, representing a $30 billion inflow for emerging markets altogether for the month.

The outflow has occurred during a spike in volatility and bigger intraday swings in the U.S. stock markets since last Friday when larger-than-expected wage growth in data that is part of the monthly U.S. non-farm payrolls report caused investors to fear inflation and potentially faster rate raises that could create higher borrowing costs for emerging markets.

Emerging markets have not seen a bigger outflow since November 2016 when in the week following the U.S. election of Donald Trump as president there was a $6 billion outflow including both stocks and bonds, according to IIF.

Among ETFs, the ELMC, which tracks the JPMorgan local currency bond index, was up about 0.5% on Tuesday after selling off on Friday and Monday.

In the week between Jan. 30 and Feb. 5, much of the cross-border portfolio outflow was concentrated in Asia, with Indonesia and Thailand seeing heavy outflows in the week. In contrast, South Africa and India saw inflows in the week between Jan. 30 and Feb. 5, according to IIF.

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