RPT-Yield-hungry investors pour $4.89 bln into bond funds -EPFR

April 5 Fri Apr 5, 2013 2:48pm EDT

April 5 (Reuters) - Investors poured a net $4.89 billion into U.S. and global bond funds in the week ended Wednesday, the highest level in over two months, reflecting the appetite for higher-yielding assets in a persistently low-interest-rate environment, EPFR Global data showed on Friday.

Emerging markets, high-yield "junk" and floating-rate bond funds each took in over $850 million for the week, while U.S. bond funds attracted $2 billion, EPFR said. Even municipal bond funds eked out modest inflows despite Stockton, California's progress toward bankruptcy, the firm noted.

"Investors showed some willingness to take on more risk in pursuit of yield" despite geopolitical and macro risks, including the North Korean threats and unorthodox policymaking in Japan and Eastern Europe, said Cameron Brandt, director of research at EPFR.

Despite talk of a large-scale investment shift market that many have called "the great rotation" -- a tilting of pension and insurance funds' long-term asset mix back toward equities and away from a heavy weighting in bonds -- investors have been putting cash to work in both bond and equity funds.

So far this year, U.S. funds that invest in stocks have gained $78.88 billion and taxable bond mutual funds have gained $76.41 billion, according to data from Thomson Reuters' Lipper service.

Brandt said retail cash came into U.S. equity funds over the last week "as those investors, who were absent for much of February and March, committed money for the second straight week."

Emerging markets equity funds tracked by EPFR Global also posted inflows, the first time since the first week of March, despite weak employment data from the United States and Europe, North Korea's brinkmanship and fresh evidence of Japan's determination to improve the competitiveness of its currency.

Latin America, Asia ex-Japan and the diversified global emerging markets equity funds all took in fresh money during a week, while emerging markets dividend funds extended an inflow streak stretching back to the late second quarter of 2012.

So far this year, more than $1.4 billion has flowed out of Brazil equity funds while Mexico equity funds have taken in over $1.2 billion. "Growth in the region's biggest economy is slowing again while inflation is at a level that limits the central bank's willingness to cut rates," Brandt said. "Mexico, meanwhile, offers the prospect of higher growth and an ambitious reform story."

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