UPDATE 2-U.S. taxable bond funds gain $1.3 bln in new cash -Lipper
By Sam Forgione NEW YORK, Aug 15 (Reuters) - Investors gave $1.3 billion to U.S.-based taxable bond funds in the latest week, marking the first inflows into the funds in three weeks, even as interest rates rose, data from Thomson Reuters' Lipper service showed on Thursday. Funds that hold floating-rate bank loans accounted for nearly all of the new demand into bond funds in the week ended Aug. 14. The funds attracted $1.45 billion in new cash, marking the 61st straight week of inflows. While the latest inflows into floating-rate loan funds were down from record cash gains of $1.87 billion the prior week, the ongoing popularity of the funds shows that investors remain fearful that a pullback in the Federal Reserve's bond-buying will cause interest rates to spike higher. Floating-rate bank loans, also known as leveraged loans, are protected from rising interest rates by being pegged to floating-rate benchmarks. "People are having another taper-tantrum," said Tom Roseen, head of research services at Lipper. He said that positive U.S. economic data such as lower weekly jobless claims and a rise in consumer spending have led investors to suspect the Fed will reduce its stimulus soon. The Fed is buying $85 billion in Treasuries and agency mortgages monthly in an effort to spur hiring and keep interest rates low. Fed presidents Richard Fisher and Dennis Lockhart hinted over the weekly period that the U.S. central bank could begin reducing its stimulus next month. The yield on the benchmark 10-year U.S. Treasury note rose about 11 basis points to 2.71 percent over the weekly period. As yields rise, prices fall. Still, funds that mainly hold Treasuries attracted $155.3 million in the week ended Aug. 14, showing a modest recovery in demand after investors withdrew a record $3.27 billion from the funds the prior week. Riskier high-yield junk bond funds had outflows of $388.2 million, however, reversing inflows of $485.6 million the previous week. Roseen of Lipper said investors were less willing to take on risk amid worries of a pullback in the Fed's stimulus. Investors withdrew $1.2 billion from municipal bond funds, up from outflows of $973.8 million the previous week and marking the 12th straight week of withdrawals. Demand for the funds has been hit by Detroit's bankruptcy filing on July 18. Stock funds gained just $947.5 million over the weekly reporting period, the smallest amount in seven weeks and down significantly from inflows of $6.28 billion the previous week. Funds that primarily hold stocks of companies outside the United States gained $2.2 billion in new cash, marking their seventh straight week of inflows. Funds that primarily hold U.S. stocks had their first outflow in seven weeks of about $1.3 billion. Overall, stock mutual funds gained $2.56 billion in new cash, while stock exchange-traded funds had outflows of $1.6 billion. ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor. The SPDR S&P 500 ETF Trust had outflows of $1.8 billion over the weekly period, the biggest among stock ETFs. The benchmark S&P 500 stock index fell 0.33 percent over the week on the concerns surrounding the Fed's stimulus plans. "A lot of people have pinned this recovery on quantitative easing," said Roseen of Lipper. He said that many investors view the Fed's easing as the catalyst for the 16.5 percent rise in the benchmark S&P 500 this year. Funds that hold European stocks were a bright spot and had inflows of $755.1 million, the most since early June. The FTSEurofirst 300 of leading European shares rose 1.87 percent over the week. Data at the end of the weekly period showed that the economies of Germany and France grew more quickly than expected in the second quarter, pulling the euro zone out of a 1-1/2 year recession. Funds that hold Japanese stocks, meanwhile, had outflows of $109.2 million, marking their third straight week of withdrawals. Data on Monday showed that Japan's economy grew at a slower-than-expected pace in the second quarter . Commodities and precious metals funds, which mainly invest in gold futures, received $130.7 million over the week, marking the first injections of cash to the funds since last March. Spot gold rose as much as 2.2 percent to $1,343.06 an ounce on Monday, its highest since July 24. The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds. The following is a broad breakdown of the flows for the week, including exchange-traded funds (in $ billions): Sector Flow Chg % Assets Count ($Bil) Assets ($Bil) All Equity Funds 0.948 0.03 3,520.527 10,383 Domestic Equities -1.287 -0.05 2,648.493 7,676 Non-Domestic Equities 2.235 0.26 872.034 2,707 All Taxable Bond Funds 1.313 0.08 1,594.979 5,074 All Money Market Funds 5.650 0.24 2,351.042 1,336 All Municipal Bond Funds -1.206 -0.41 290.920 1,398
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