UPDATE 1-Bond mutual funds post record $70.7 bln outflow so far this year -TrimTabs
Dec 11 (Reuters) - U.S.-listed bond mutual funds have posted an outflow of $70.7 billion so far in 2013, surpassing the previous annual record outflow of $62.5 billion in 1994, TrimTabs Investment Research said on Wednesday.
"The 'taper talk' that started in May proved to be a huge inflection point for the credit markets," said David Santschi, chief executive officer of TrimTabs.
In an address to lawmakers on May 22, Federal Reserve Chairman Ben Bernanke started to discuss how the Fed might reduce bond purchases. That triggered a bond market meltdown.
Indeed, the Pimco Total Return Fund, the world's largest bond fund, has seen investors pull a net $36.9 billion from the fund this year, according to Morningstar data.
"The reaction to the prospect of 'tapering' among retail investors has been pretty violent even though the Fed hasn't made any changes to its bond buying program," said Santschi. "What will happen when the Fed actually takes action?"
"Bond mutual funds have experienced outflows for seven consecutive months after they posted inflows in each of the preceding 21 months," Santschi said.
Wall Street fell modestly on Wednesday as investors weighed the possibility of a wind-down of Fed stimulus in the wake of a provisional budget deal reached in Washington. The Federal Reserve policy-making meets next on Dec. 17-18.
The budget agreement, reached late Tuesday, would end three years of impasse and fiscal instability in Washington that culminated in October with a partial government shutdown.
While the deal removes a key uncertainty hanging over markets, some say it strengthens expectations that the U.S. central bank may soon scale back its $85 billion-a-month stimulus that has fueled a stock market rally this year.
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