Bond funds worldwide attract record $9.97 bln inflows-EPFR

NEW YORK Fri Nov 9, 2012 4:18pm EST

NEW YORK Nov 9 (Reuters) - Investors pumped a record amount of money into bond funds worldwide in the latest week as pending policy changes in the United States and ongoing worries about Europe weighed on the global economic outlook, data from EPFR Global showed on F rid ay.

Bond funds attracted $9.97 billion in new cash in the week ended Nov. 7, a record weekly inflow, according to the fund-tracking firm. U.S. bond funds accounted for $5.99 billion of that sum, of which $1.7 billion flowed into U.S. government bond funds - the most committed in over a year, according to EPFR.

"The markets have become a touch more risk-averse and the S&P seems to have lost some of its momentum, so people have gone more toward the risk-off trade in the U.S.," said Jim Awad, managing director at Zephyr Management in New York.

The benchmark S&P 500 index fell 1.25 percent over the reporting period. Disappointing company earnings, renewed worries about the looming "fiscal cliff" of U.S. tax hikes and spending cuts and the European Commission's forecast that the euro zone would barely grow next year dragged on markets.

Demand for benchmark 10-year U.S. Treasuries rose on Wednesday after the election, with the benchmark yield falling to 1.6246 percent, its biggest single-day drop since May 30. The 10-year Treasury remained in that territory to yield 1.6233 percent in intraday trading on F rid ay.

Higher-yielding, riskier bond funds found some fans, however. Roughly $954 million went into high-yield bond funds and $774 million into emerging market bond funds, but that still fell short of this year's weekly averages.

Emerging market bond funds have pulled in roughly $1 billion per week this year, while high-yield bond funds have attracted about $1.6 billion per week, EPFR Global said.

HUGE INFLOWS IN EMERGING MARKETS

European bond funds attracted $845 million in inflows amid the European Commission's negative 2013 forecast.

Investors can find higher yields in European debt as the bonds receive support from the European Central Bank's stimulus plans, said Zephyr Management's Awad.

Inflows of $2.43 billion to emerging market stock funds and new demand for funds that hold global stocks accounted for the net inflow of $1.12 billion to stock funds worldwide.

Investors are still finding opportunity in emerging market stocks, which some believe have stronger fundamentals than developed countries' stocks, without the high government debt levels.

"Emerging markets may be closer to turning the corner than developed markets," said Alan Gayle, senior investment strategist at RidgeWorth Investments. He said growth in emerging economies is still more promising than in developed ones.

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