Mortgage backed and long term corporate funds also witnessed “significant outflows” last week.

“Going into mid-June EPFR Global-tracked bond funds set a new outflow record for the second week running as fears that US monetary policy will tighten in the second half of the year prompted more investors to head for the exits,” the fund flow data provider says.

The Fed's programme has been credited with helping to keep markets buoyant since the financial crisis. Investor sentiment took a hit in late May when Fed chairman Bernanke that the central bank may start to taper its $85bn-a-month bond-buying scheme “in the next few meetings” if the country's labour market continues to strengthen.

EPFR Global's figures also show that equity funds suffered $8.5bn in redemptions during the week ending 12 June. Outflows from emerging market equity funds, as well as emerging market debt funds, reached their highest since the third quarter of 2011 with combined redemptions of more than $8bn.

Eoin Treacy's view The compression in yields since the beginning of quantitative easing has been among the most impressive momentum driven moves in history, not least among sovereign bonds. However as with any such event, when the motivating force behind the advance is removed, declines are usually not that far off. Leveraged players in particular come under immediate pressure and can contribute to a change in the trend's direction.

At present, the continued supply of liquidity from the Fed is under question so Mr Bernanke's remarks over the next couple of days will be pored over for meaning. However what is now clear is that we will have a new untested Fed Governor next year and this represents a point of uncertainty. Even assuming the dovish Janet Yellen is appointed, we do not yet know how she will react to market stress. Additionally, the task of tapering and eventually removing QE is likely to be a lot more challenging than introducing it. Against this background, it is understandable that fixed income investors are nervous.

The performance of municipal bonds is a case in point. The iShares S&P New York Municipal Bond Fund trended consistently higher between early 2011 and November last year. It then pulled back to break the progression of higher reaction lows, dropped below the 200-day MA in March, experienced resistance in the region of the MA from April and plunged lower over the last six weeks. While oversold in the short-term, significant technical deterioration has occurred. There is scope for a reversionary rally but if the performance posted from early 2011 is to be repeated, it will at least need to demonstrate the return of demand above it lows on a pullback. Even then a sustained move back above the 200-day MA will be required to convince investors that the worst has passed.