Stock funds worldwide attract $11.5 billion after record outflow: BofA

NEW YORK Fri Feb 14, 2014 10:43am EST

A Bank of America sign is shown on a building in downtown Los Angeles, California January 15, 2014. REUTERS/Mike Blake

A Bank of America sign is shown on a building in downtown Los Angeles, California January 15, 2014.

Credit: Reuters/Mike Blake

NEW YORK (Reuters) - Fund investors worldwide committed $11.5 billion to stock funds in the week ended Wednesday on reassurance from Federal Reserve chair Janet Yellen that the U.S. economy was on a better track, data from a Bank of America Merrill Lynch Global Research report showed on Friday.

The inflows in the week ended February 12 reversed the prior week's record cash outflows of $28.3 billion, data from the report, which also cited data from fund-tracking firm EPFR Global, showed.

Funds that specialize in U.S. stocks attracted $7 billion in new cash, reversing the prior week's record cash outflows of $24 billion. Funds that hold European stocks also garnered demand with inflows of $4 billion, marking their 33rd straight week of inflows.

The inflows into stock funds came after Yellen, in her first public comments as Fed chief on February 11, emphasized continuity in the U.S. central bank's policy strategy of cutting asset purchases by $10 billion a month.

"Yellen pretty much laid out a steady-as-she-goes outlook for monetary policy," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "The markets were encouraged by that."

U.S. stocks rallied on Yellen's comments, with investors interpreting the reduced need for the Fed's bond-buying as a positive sign for the U.S. economy.

The benchmark Standard & Poor's 500 .SPX stock index rallied 3.9 percent over the reporting period.

Investors continued to pull cash out of emerging market stock funds, which posted outflows of $3.1 billion, extending their record outflow streak to 16 straight weeks.

The outflows came as fears of a protracted capital flight out of emerging market assets, while subdued, remained in investors' minds in the latest week.

Bond funds worldwide attracted $4.7 billion in new cash, marking the second straight week of inflows after record cash inflows of about $15 billion in the previous week.

The inflows came despite losses on benchmark U.S. Treasuries prices.

The yield on the 10-year U.S. Treasury note rose 14 basis points to 2.76 percent over the weekly period after Yellen's comments, some positive U.S. jobless data, and a U.S. debt ceiling deal limited demand for safe-haven bonds. Bond yields move inversely to their prices.

"The inflows into bond funds reflect continuing concern over the risks of the equity market having a correction," said Margaret Patel, senior portfolio manager at Wells Capital Management.

Funds that mainly hold safe-haven U.S. Treasuries attracted $1.6 billion in new cash after big inflows of $13.2 billion in the previous week, data from the report showed.

Investors showed their risk appetite by committing $1.8 billion to riskier high-yield bond funds, marking their first inflows in three weeks.

Funds that hold investment-grade corporate bonds, which are deemed safer than high-yield bonds because they sport higher-quality credit ratings, attracted $2.5 billion in new cash, marking their 8th straight week of inflows.

"From a total return basis, investment-grade bonds have been pretty decent," said Patel of Wells Capital Management.

The Barclays U.S. Aggregate bond index, which tracks the performance of U.S. dollar-denominated investment-grade bonds, is up 1.52 percent this year.

(Reporting by Sam Forgione; Editing by Chizu Nomiyama and Meredith Mazzilli)