Bond investors exhibited poor market timing skills in the first half of 1995, when the 30-year Treasury bond yield dropped 125 basis points and the one-year Treasury bill shed 139 basis points, according to IBC's Bond Fund Report.
In the first half of 1995, the majority of bond funds gained assets due to the market's rally but experienced net redemptions. Of the largest funds in each of 26 categories, only five grew from new money.
Meanwhile portfolio managers deployed more cash than before. Figures for nearly all fund categories showed portfolios becoming more fully invested during the six months ended June 30.
Taxable bond funds reduced cash positions to 5.3% from 6.6% in the first half of 1995, while municipal funds reduced cash to 2.3% from 3.1%.
Changes in bond fund durations have been mixed. While the duration of the "all taxable" category did not change, municipal funds shortened to 7.6 years from 8.2 years.
Virtually every municipal category reduced duration slightly while every corporate category, with the exception of junk bonds, lengthened.