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Investors flee to bonds again on Greece fears -EPFR
NEW YORK |
NEW YORK May 18 (Reuters) - Investors sought safe-haven U.S. bonds in the latest week on fears of a chaotic exit by Greece from the euro zone and a possible unraveling of the currency union, data from EPFR Global showed on Friday.
U.S. bond funds gained $5.6 billion in new money while U.S. equity funds lost $2.79 billion in outflows in the week ended May 16, the Cambridge, Massachusetts-based fund-tracking firm said. In the previous week, U.S. bond funds saw another huge jump of net inflows--at $6.46 billion--while U.S. equity funds saw outflows of $4.78 billion.
Late Friday, Group of Eight leaders prepared to meet to discuss Europe's debt crisis as global stocks capped their worst week in eight months.
Escalating worries of a Greek default and global contagion from a euro zone banking crisis led investors to seek U.S. government bonds, said Paul Dietrich, chief executive officer and co-chief investment officer of Foxhall Capital Management in Orange, Connecticut.
On a global scale, all bond funds had net inflows of $6.64 billion while all equity funds had net outflows of $5.12 billion.
The benchmark S&P 500 Index fell 2.2 percent over the period in response to political uncertainty in Greece, weak data on China's economy, and signs that the U.S. Federal Reserve may consider further easing policies to be necessary.
Emerging market bond funds had inflows of $633 million, down from inflows of $1.05 billion the previous week, while emerging market equity funds lost $2.25 billion in outflows compared to outflows of $1.11 billion the previous week.
Emerging market bond funds have seen over $20 billion in inflows this year, said EPFR Global's Director of Research Cameron Brandt.
Emerging markets are growing and are "not likely to have serious financial problems like we're going through," said Dietrich, who added that fewer inflows is a result of overall investor caution while outflows from emerging market equities is in response to the contagion fears surrounding Europe.
"We expect the situation in Europe to continue to deteriorate," added Gregory Whiteley, portfolio manager at DoubleLine Capital. "There is a lot of risk and a lot of uncertainty, and that continues to create demand for safe-haven assets," he said.
This was the second-best week for long term U.S. government bond funds this year, said Brandt.
That category saw inflows of $644.7 million, said EPFR Global managing director Brad Durham.
High-yield "junk" bonds had outflows of $433 million, which were a result of major redemptions from a single institutional investor rather than a "true outflow" representing the funds' performance, said EPFR Global Managing Director Ian Wilson.
This year, U.S. bond funds alone have seen $103.7 billion in inflows, more than two times the full-year total for 2011, said Brandt.
Despite concerns over euro-zone economies, European bond funds had $197 million in inflows and European equity funds had $154 million in inflows.
SECTOR-SPECIFIC AND BRIC FUNDS
Financial sector funds were most battered by the flight to safety, and had $910 million in outflows, the most since October of 2008, said Brandt.
News on May 11 of JP Morgan's $2 billion trading loss spread concerns about U.S. banks over the period.
Aside from financials, commodities-sector funds lost $611 million to outflows.
Each of the individual BRIC country's funds saw outflows over the period. China, the subject of weak economic data over the period, had $135 million in outflows, while Brazil had $270 million in outflows.
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