Investors wary of Europe but ready to jump into high-yield -EPFR
* Investors withdraw $7.5 bln from European money market funds
* U.S bond funds gain $3.34 bln
* High yield funds have inflows of $1.54 bln
By Katya Wachtel
NEW YORK, June 22 (Reuters) - Even as a conservative, pro-bailout party won the Greek election and quieted fears that the nation would exit the euro zone, anxious investors withdrew billions from European money market and bond funds and sought safety in the United States in the latest week, data for EPFR Global showed on Fr ida y.
Investors pulled $7.5 billion from European money market managers in the week ending June 20, and withdrew $886 million from European bond funds after removing over $1 billion from those managers the previous week. Redemptions from German bond funds reached a 12-week high.
"Growing uncertainty around successful interventions by the European Commission, the strength of European banks and progress in fiscal management of Greece and Spain all weigh on investors," said J.R. Rieger, vice president of Fixed Income Indices at Standard and Poor's, commenting on the flight of cash from Europe in the latest week.
Money Market Funds overall recorded their biggest outflow since the first week of last August, with outflows of $33.43 billion.
"Money market funds are vehicles used to store cash, and with investors afraid that the banks in Europe could be in trouble, the flight out of those money market funds is pre-emptive - investors want to make sure their money is in a safe place," said Leon Mirochnik, vice president at TrimTabs Investment Research.
EPFR cited concerns about exposure to Euro zone debt, the need to meet quarterly U.S. tax payments and fears that already minimal returns will be driven lower by additional quantitative easing led as reasons for such significant money market withdrawals.
The beneficiaries of investor unease over Europe were U.S bond funds, which gained $3.34 billion after a drop the prior week, and high yield funds, which had $1.58 billion in inflows, a seven-week high.
Mortgage backed funds took in $444 million, while municipal bonds funds gained $618 million.
TrimTab's Mirochnik said investor appetite for riskier assets may have been due in the latest week to an expectation that the U.S Federal Reserve was going to extend its monetary program of buying and selling short-term and long-term bonds, known as Operation Twist.
U.S stock funds gained $669 million in investor money - the first consecutive weekly inflow into that category since mid-March.
"U.S. corporations have cash heavy balance sheets and defaults have been low in the high yield arena," Standard and Poor's Rieger noted.
Meanwhile, funds that focus on stocks in the developed European countries had withdrawals of $216 million, the fifth consecutive week of redemptions. But investors were more confident in German equities, sending $869 million in new capital to those funds.
SECTOR-SPECIFIC, AND BRIC FUNDS
Investors put $307 million into Brazil-focused funds in the latest week, withdrew over $60 million from funds that specialize in Russia and India and took $141 million from funds focused on China. China equity funds recorded the eight straight weeks of net redemptions, losing $1.3 billion.
Commodities funds gained $1.16 billion, helped by inflows of $1.2 billion to gold and precious metal funds, a 20-week high.
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