U.S.-based bond funds have $8.1 billion outflow in latest week: ICI

NEW YORK Tue Dec 24, 2013 10:34am EST

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NEW YORK (Reuters) - Investors in U.S.-based mutual funds pulled $8.1 billion out of bond funds in the week ended December 18 on fears that a pullback in the Federal Reserve's bond-buying would hurt bond prices, data from the Investment Company Institute showed on Tuesday.

The outflows marked the biggest weekly withdrawals from the funds since late August, the data from ICI, a U.S. mutual fund trade organization, showed. The outflows also marked the 12th straight week of withdrawals from the funds.

The outflows largely came ahead of the Fed's decision to cut its bond purchases by $10 billion a month to $75 billion a month at the end of its two-day meeting on December 18.

Investors began pulling cash out of bond funds in early June on fears that a pullback in the Fed's bond-buying program would cause a spike higher in interest rates, thereby hurting bond prices, ICI data show.

Fed Chairman Ben Bernanke triggered a bond market selloff and outflows from bond funds when he told Congress on May 22 that the central bank could begin reducing its stimulus if the U.S. economy looked strong enough.

Investors also pulled $2.7 billion out of funds that mainly hold U.S. stocks over the weekly period, marking the fourth straight week of withdrawals but down from sizeable outflows of about $4.6 billion from the funds the previous week.

Funds that specialize in stocks of companies outside the United States, meanwhile, continued to attract new demand with inflows of $3.1 billion. The funds have attracted new cash over every weekly period since the start of May, ICI data show.

The Standard & Poor's 500 stock index rose 1.6 percent over the weekly period, despite concerns that a cutback in the Fed's stimulus could hurt stock prices. The Fed's bond-buying has helped boost the S&P 500 over 28 percent this year.

Hybrid funds, which can invest in stocks and fixed income securities, attracted $483 million in new cash, down from the prior week's inflows of $877 million but still marking the 11th straight week of inflows.

(Reporting by Sam Forgione; Editing by Chizu Nomiyama and Bernadette Baum)

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