Bond funds worldwide suffer $1.6 b outflow: BofA

Tuesday, 6 August 2013 00:00 - - {{hitsCtrl.values.hits}}

REUTERS: Bond funds worldwide suffered outflows of $1.6 billion in the latest week as investors awaited signs from the Federal Reserve regarding its bond-buying stimulus, data from a Bank of America Merrill Lynch Global Research report showed Friday. The outflows from bond funds in the week ended 31 July came after investors gave $4.4 billion to the funds the previous week, the report showed, also citing data from fund-tracker EPFR Global. Over the week, investors awaited Wednesday’s statement from the Federal Open Market Committee regarding the pace of its $85 billion in monthly purchases of Treasuries and agency mortgages. Investors fear a further rise in interest rates if the Fed cuts its stimulus. The Fed’s bond-buying has been a major source of support for bond and stock markets. Fed Chairman Ben Bernanke’s testimony to Congress on 22 May that the Fed could reduce its easing later this year triggered a selloff in the bond market. Municipal bond funds had outflows, for the 10th straight week, of $1.6 billion, while riskier high-yield junk bond funds suffered small outflows of $57 million, down from record inflows of $5.4 billion the prior week, data from the report showed. However funds that hold floating-rate bank loans gained $1.6 billion in new cash, marking their 58th straight week of inflows. Floating-rate loans are protected from rising interest rates by being pegged to floating-rate benchmarks. Emerging market bond funds suffered $700 million in outflows, meanwhile, marking their 10th straight week of outflows, the report said. Investors gave $6.6 billion to stock funds, showing continued demand for the funds after inflows of $8 billion the prior week. The inflows came even as the S&P 500 fell a slight 0.01% over the weekly period on mixed corporate earnings and caution ahead of the Fed’s comments and the US government’s monthly jobs report Friday. Stock exchange-traded funds attracted $5.3 billion of the total inflows into stock funds. Investors also favoured US stock funds, and poured $4.8 billion into the funds, marking their fifth straight week of cash gains. Investors have poured $206 billion into stock funds worldwide since November 2012, the report said. Those inflows have reversed outflows of $530 billion over the prior five years, data from the report showed. The S&P 500 is up over 19% so far this year. Japanese stock funds suffered outflows of $400 million, their first weekly outflow since January 2013, the report said. Japan’s Nikkei average fell 7.2% over the reporting period, with investors worried about a stronger yen and that plans to increase the country’s sales tax, its most significant fiscal reform in years, could be watered down. Money market funds, which are low-risk vehicles that invest in short-term securities, suffered outflows of $10.3 billion after investors pulled $12 billion from the funds the previous week, data from Bank of America Merrill Lynch and EPFR Global showed.

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