U.S.-based bond funds see about $2.9 bln of outflows -ICI
By Sam Forgione NEW YORK, Feb 12 (Reuters) - Investors in U.S.-based mutual funds pulled about $2.9 billion out of bond funds in the week ended Feb. 5 even as weaker-than-expected U.S. economic data pushed safe-haven bond prices higher, data from the Investment Company Institute showed on Wednesday. The outflows from bond funds in the week ended last Wednesday were the biggest in six weeks, according to data from ICI, a U.S. mutual fund trade organization. U.S.-based stock funds, meanwhile, attracted $1.9 billion in new cash. While taxable bond funds posted outflows, resulting in net outflows from all bond funds, tax-free municipal bond funds posted small inflows of $146 million. That marked their fourth straight week of inflows. The net outflows from bond funds marked the third straight week of withdrawals and came despite a rise in safe-haven Treasuries prices on weaker-than-expected data on U.S. factory activity. The yield on the 10-year U.S. Treasury note fell to 2.57 percent after the data, its lowest since the beginning of November. Bond yields move inversely to prices. "We've returned back to that pattern of moderate outflows from bond funds. I think it really is reflective of the overall rising interest rate environment," said Brian Reid, chief economist at ICI. The latest outflows from bond funds came after two weeks of inflows at the start of this year. Some investors were optimistic that bonds, which largely posted losses last year on fears that a pullback in the Federal Reserve's bond-buying would trigger a spike higher in interest rates, would rebound this year. While the yield on the 10-year U.S. Treasury note has fallen so far this year, it rose more than 1 percentage point last year after then-Fed chairman Ben Bernanke signaled in May that the central bank could begin reducing its purchases. Among stock funds, those that mainly hold U.S. stocks had outflows of about $1.6 billion, marking their first outflows in four weeks, while funds that specialize in non-U.S. stocks attracted about $3.5 billion. The inflows into funds that specialize in non-U.S. stocks came even as global stock markets fell on fears of a protracted flight out of emerging market assets and on the weak U.S. economic data. "For the past decade, Americans have been reducing their allocation to domestic funds and increasing their allocation to world stock funds," Reid said. MSCI's world equity index fell 2 percent over the weekly reporting period, while the benchmark Standard & Poor's 500 stock index fell 1.3 percent. The latest weekly inflows into non-U.S. stock funds were common in recent months, however. The funds last recorded outflows in the week ended May 1 of last year, according to ICI data. Hybrid funds, which can invest in stocks and fixed income securities, attracted $1.4 billion in new cash, down modestly from the prior week but still marking their 18th straight week of inflows. The following ICI data shows estimated flows for the past five weeks (all figures in millions of dollars) : 1/8/2014 1/15 1/22 1/29 2/5 Total Equity 34 8,040 6,452 5,482 1,886 Domestic -2,765 4,242 2,493 1,881 -1,564 World 2,799 3,798 3,959 3,601 3,450 Hybrid* 1,102 1,055 1,642 1,738 1,385 Total Bond 2,730 967 -262 -948 -2,860 Taxable 3,069 727 -382 -1,458 -3,006 Municipal -339 239 121 510 146 Total 3,865 10,062 7,833 6,272 411 *Hybrid funds can invest in stocks and/or fixed income securities.