v10i4 Jeske

This paper examines the determinants of investor flows into U.S. corporate bond mutual funds, with a focus on monetary policy and fund-specific characteristics during the COVID-19 crisis. These funds, as non-bank financial intermediaries, are vulnerable to sudden investor redemptions due to liquidity mismatches. Using monthly data from 2001 to 2021, the analysis applies panel regressions with fund style and time fixed effects to assess how monetary policy, fund characteristics, and market conditions influence investor behavior. Results show that higher effective federal funds rates are significantly associated with reduced fund flows. Past flows and performance rankings are strong predictors of current flows, while fund cash holdings matter mainly in riskier fund types. During the COVID-19 crisis, flow sensitivity to interest rate changes intensified. Although Federal Reserve policy announcements in spring 2020 coincided with a quick return of inflows, the findings emphasize ongoing structural fragility. By analyzing flow dynamics alongside macroeconomic factors and policy responses, this research contributes to understanding the determinants of corporate bond mutual fund flows and the complex role of central bank actions during periods of systemic stress.