UPDATE 1-U.S.-based stock funds attract $13.5 bln in latest week -ICI

Wed Oct 30, 2013 4:17pm EDT

NEW YORK, Oct 30 (Reuters) - Investors in U.S.-based mutual
funds poured $13.5 billion into stock funds in the latest week
on expectations the Federal Reserve would keep its easy money
policies intact into 2014, data from the Investment Company
Institute showed on Wednesday.
    The inflows into stock funds in the week ended Oct. 23
marked the biggest weekly inflow into the funds since the week
ended January 9, according to the data from ICI, a U.S. mutual
fund trade organization.
    Funds that hold U.S. stocks attracted $9.2 billion of the
net inflows into stock funds, marking the biggest weekly inflow
into the funds since ICI began tracking weekly mutual fund flows
in January 2007.
    Funds that hold non-U.S. stocks, meanwhile, attracted $4.36
billion in new cash, marking the biggest weekly inflows into the
funds since mid-February. 
    Global stock markets rallied over the reporting period and
benchmark 10-year Treasury yields fell after a U.S. budget deal
shifted investors' focus to the timing of the Fed's reduction in
its $85 billion in monthly bond-buying. 
    Weaker-than-expected U.S. jobs data bolstered expectations
that the Fed would maintain its stimulus into
2014. 
    The Standard & Poor's 500 stock index hit record
highs and rose 1.44 percent over the reporting week. MSCI's
world equity index rallied 1.8 percent over the
period. 
    Bond funds posted outflows of $2.3 billion over the weekly
period, marking the fourth straight week of net outflows from
the funds but down from outflows of $5.45 billion over the
previous week. 
    The latest outflows came even as the yield on the benchmark
10-year U.S. Treasury note fell about 19 basis points to 2.49
percent over the week on the expectations of continued Fed
stimulus. Bond yields move inversely to their prices. 
    Hybrid funds, which can invest in stocks and fixed income
securities, attracted $2.32 billion in new money, marking the
biggest inflows into the funds since mid-July.
    In September, investors poured $45.6 billion into money
market funds, marking the biggest monthly inflows into the funds
since December 2012, data from ICI showed. 
    Money market funds attracted big inflows last month on
uncertainty surrounding the Fed's plans for reducing its
stimulus, along with concerns over looming U.S. debt talks,
according to Tom Roseen, head of research services at Lipper. 
    Investors also committed $2.76 billion to stock funds in
September, marking the weakest monthly turnout for the funds
since they had outflows in Dec. 2012, according to ICI data.
     The modest inflows came even as the S&P 500 hit record
highs in the wake of the Fed's decision on Sept. 18 to maintain
the pace of its bond-buying program. 
    Investors also pulled $11.33 billion from bond funds in
September, marking the fourth straight month of outflows but
less than outflows of $29.14 billion in August. 
    The outflows from bond funds in September continued despite
reduced selling pressure on bonds. The yield on the 10-year U.S.
Treasury note plunged 17 basis points following the Fed
decision. As yields fall, bond prices rise.
    
    The following data shows estimated ICI flows for the past
five weeks (all figures in millions of dollars):
    
                  9/25/13  10/2/13   10/9/13  10/16/1   10/23/13
                                                    3  
 Total Equity      -3,670   -3,356    -3,113    2,933     13,543
    Domestic       -3,855   -4,096    -5,184      832      9,185
    World             186      740     2,071    2,101      4,358
 Hybrid*            1,318      -52       191      619      2,315
 Total Bond         1,766     -396    -2,550   -5,446     -2,322
    Taxable         2,054      473    -1,521   -3,597     -1,300
    Municipal        -289     -869    -1,029   -1,849     -1,023
 Total               -586   -3,803    -5,472   -1,893     13,535
 *Hybrid funds can invest in stocks and/or fixed income
securities.