U.S. bond funds show weak turnout as munis suffer -ICI

Wed Dec 26, 2012 9:46pm EST

By Sam Forgione
    NEW YORK, Dec 26 (Reuters) - Investors in U.S.-based mutual
funds committed the least amount of new cash to bond funds in
six months and shunned municipal bonds in the latest week as
U.S. lawmakers hit a standstill in talks over the looming
"fiscal cliff," data from the Investment Company Institute
showed on Wednesday.
    Investors gave just $431 million to bond funds in the week
ended Dec. 19, said ICI, a U.S. mutual fund trade organization.
The modest inflows mark the weakest turnout for the funds since
suffering outflows at the end of May.
    Funds that hold municipal bonds, meanwhile, had outflows of
$3.26 billion, which is the most withdrawn from the funds this
year. In the prior week, the funds attracted inflows of $211
million.
    Investors have become wary of municipal bonds in recent
weeks in light of potential federal tax reforms being discussed
in Washington that could alter the tax-exempt status of the
securities.
    The benchmark S&P 500 stock index rose 0.51 percent
over the reporting period despite gridlock between U.S.
President Barack Obama and U.S. Republican House Speaker John
Boehner in talks to avert the "fiscal cliff" of tax hikes and
spending cuts set to occur early next year.
    Investors withdrew a net $4.93 billion from stock funds over
the period, showing less aversion to the funds after redeeming
$8.48 billion the previous week.
    Hybrid funds, which can invest in stocks and fixed income
securities, attracted just $11 million in new cash over the
period after pulling in $119 million the prior week. 
    The following table is a breakdown of ICI flows for the past
five weeks (all figures in the millions of dollars):
 
               11/20/12  11/28/12  12/5/12  12/12/12  12/19/2012
 Total Equity    -8,818      -626   -7,180    -8,478      -4,932
    Domestic     -7,504      -613   -5,858    -7,232      -5,224
    World        -1,314       -13   -1,321    -1,246         292
 Hybrid*         -1,197       144      -71       119          11
 Total Bond       4,397     4,255    5,165     1,787         431
    Taxable       3,031     2,956    4,092     1,576       3,694
    Municipal      1366     1,299    1,074       211      -3,263
 Total           -5,618     3,772   -2,085    -6,572      -4,490
 *Hybrid funds can invest in stocks and/or fixed income
securities.
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