July 3rd 2012
In May, the Dow Jones Industrial Average snapped its seven-month long winning streak, losing 6.21% for the month and posting one of its worst monthly returns in two years. Both the S&P 500 and the NASDAQ Composite lost more than 6 percent on an average.
In May, the PIMCO Total Return Fund (the largest bond fund) had a nice gain of 0.85% (net of fees). The previous month the fund gained a healthy 1.46%. Both April and May were better months for bond returns. The stock market’s pullback did not appear to scare investors, however, the bond market strength attracted new money.
Overall, flow of funds into bond funds mirrored the previous money. Investors are trying to balance their twin desires for yield and safety by investing in the lowest rated, investment grade debt.