I Intelsat SA

By Matt Wirz 

A steady rise in Treasury yields has investors putting the brakes on their contributions to U.S. bond funds.

Investors yanked more than $3 billion out of mutual funds that focus on Treasurys in the first two weeks of November, a sharp reversal from October when net inflows amounted to almost $4 billion, according to data from Lipper. The yield on the benchmark 10-year note stood at 1.824% early Friday, according to Tradeweb, up from below 1.5% in September.

Treasury yields rise as traders sell the bonds and prices fall. U.S. government debt attracted buyers over the summer as investors sought havens and expectations rose that the Federal Reserve would cut interest rates. Now that the Fed has paused and concerns about global recession have eased, Treasurys are falling out of favor and so are the funds that invest in them.

"Flows typically follow returns, and a slowdown in bond buying would be consistent with the increase in interest rates since early October," Bank of America Corp. Credit Strategist Yuri Selger wrote in a research report Thursday.

Demand is also declining for funds that specialize in bonds issued by companies with investment-grade credit ratings, which typically trade in line with the government debt market because their bonds are valued by comparing their yield to that of Treasurys. Weekly inflows to the funds slowed to an average $2.2 billion, down from an average of $2.5 billion in September and October, according to data from Lipper.

In junk-bond markets, satellite operator Intelsat SA's bonds due 2023 jumped about 9% to 70 cents on the dollar, partially retracing losses from recent days, according to data from MarketAxess. The bonds started the week around 80 before dropping to 65 Thursday after JPMorgan Chase & Co. published a report suggesting a spectrum auction the company planned to participate in would be delayed.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, headed for a third session of declines Friday, falling less than 0.1% to 90.89 from 90.99 Thursday.

Write to Matt Wirz at matthieu.wirz@wsj.com

(END) Dow Jones Newswires

November 15, 2019 12:48 ET (17:48 GMT)

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