Investors returned to US long-term bond funds in May
June 25 (Reuters) - U.S. long-term bond funds drew massive inflows in May, reversing April's drawdown and indicating investors sought the safety of higher-yielding debt, as they weighed a host of uncertainties around trade tariffs, inflation and fiscal deficits.
According to Morningstar data, U.S. long-term bond funds attracted $7.4 billion in May, their largest monthly inflow in over two years, after facing sharp outflows in April.
Jeana Doubell, fixed income analyst at Morningstar, said inflows into long-term bond funds in May reflect investor expectations of weaker growth and a view that bonds offered better value than other riskier assets.
U.S. long-term bonds were sold off heavily in April on concerns that U.S. tariff measures could fuel inflation, while expectations that President Donald Trump's tax bill could inflate the deficit and Treasury supply added to the pressure.
However, analysts said those concerns have eased as trade talks progress, rekindling appetite for long-term bonds.
"Long-bond prices are susceptible to inflation, and recent data shows very little inflation above the Fed's 2% target," said Chris Gunster, head of fixed income at Fidelis Capital Partners. "As long as inflation is less of a concern, then long-dated Treasuries should reassert themselves as a hedge against equities and other risk asset declines."
"The smart investors should already be locking in longer-term rates," he said.
The Morningstar data showed short-term bond funds saw $5.8 billion in outflows after strong inflows the previous month, while intermediate-term bond funds attracted $4.2 billion.
iShares 20+ Year Treasury Bond ETF led with inflows of $4.3 billion, while iShares 10-20 Year Treasury Bond ETF and iShares 7-10 Year Treasury Bond ETF received $1.2 billion and $625 million, respectively.
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This includes a report filed by the SEC's blockchain expert Patrick Doody: buried at the bottom of a sworn statement canvassing VERI trading volumes, Doody admits that he was incorrect to previously characterize the destination accounts for the £2 million ($2.7 million) as belonging to Middleton when in fact the accounts were in the name of Veritaseum LLC. This allegedly never got the chance to come up to court at the time, as Middleton and Veritaseum reached a settlement agreement with the SEC shortly thereafter. According to Middleton's latest filing accusing the SEC of fraud on the court: 'Defendants contend this outcome was coerced by the SEC's misconduct before the Court, which froze Defendant's assets based on a lie, that rendered Defendants unable to afford to be able to proceed with legal fees to continue its fight. In effect, but for the SEC obtaining the asset freeze, Defendants would have been able to defend the allegations and proceed in the normal course of due process.' 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Mere perjury or attorney misconduct is not by itself enough to qualify. U.S. v Buck in 2002 ruled that fraud in the court must include 1) a deliberate scheme to defraud the court, 2) with intention to deceive, and 3) which corrupts the impartial functions of the court. Middleton's latest filing argues that the SEC conducts satisfy all of these requirements. He says the conduct by SEC attorneys was intentional misconduct: they knew at the time of the asset freeze hearing that the destination of the fund transfers was a Veritaseum account rather than a Reggie Middleton account. This was done 'to create a sense of urgency to obtain the relief they desired – the asset freeze.' He also says that the conduct was such that it corrupted judicial integrity: the SEC attorney knew both that the information being presented at the freeze hearing was false and that the Judge was specifically relying on it in making her determination to freeze Veritaseum assets. The filing also points to the witness intimidation. This all pressured the defendants to settle: the frozen funds would have otherwise been used to mount a robust legal defense, but with the funds frozen, Middleton and Vertisaeum suffered fairly severe penalties due to his settlement with the SEC. In addition to the nearly $10 million worth of monetary penalties, he and his companies were barred from participating in virtually any securities-related activities, and Middleton was banned from serving as an officer or director of any securities issuer. Between those prohibitions, Middleton was practically frozen out of the digital asset industry. SEC's response The SEC filed their response to Middleton's motion to vacate last week. First, they deny any such fraud took place. 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