Global bond funds posted their biggest money outgo in nearly two years in the week ended Feb. 16, as surging inflation levels fanned bets that U.S. interest rates would be hiked more aggressively this year.

Investors dumped global bond funds worth $56.63 billion in their biggest weekly net selling since March 25, 2020, Refinitiv Lipper data showed.

Investors feared larger-than-anticipated U.S. interest rate hikes this year after data last week showed consumer prices in January saw the biggest year-on-year increase in four decades.

Two-Year Treasury Yield Up 30 BPS

The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, has gained over 30 basis points (BPS) this month.

U.S. and European bond funds faced net selling of $44.75 billion and $8.55 billion, respectively, in the week through Feb. 16. However, Asian bond funds drew $0.11 billion in inflows.

Investors offloaded corporate bond funds of $7.17 billion and global high yield bond funds worth $6.81 billion, in their biggest net selling since at least March 25, 2020. Inflation-protected bond funds also saw an outflow worth $0.98 billion.

Meanwhile, government bond funds lured $3.49 billion, the largest inflow in nine weeks.

Money inflows into global equity funds dropped to a three-week low of $1.12 billion in the week.

Utilities and healthcare sector funds faced outflows of $642 million and $516 million respectively, although financials and tech funds obtained $1.3 billion and $419 million respectively.

Investors sold global money market funds of $69.85 billion, posting their biggest net selling in four weeks.

Money Into Precious Metals, Energy

Among commodity funds, precious metals witnessed a fifth weekly inflow, worth $540 million, the biggest in three weeks, while energy funds attracted $42 million in net purchases.

An analysis of 24,113 emerging market funds showed equity funds obtained $2.09 billion in net buying, a 49% drop over the previous week, while bond funds posted outflows of $1.99 million.