U.S.-based bond funds attract $1.1 bln in latest week -ICI

Wed Feb 19, 2014 12:12pm EST

By Sam Forgione
    NEW YORK, Feb 19 (Reuters) - Investors in U.S.-based mutual
funds committed $1.1 billion to bond funds in the latest week as
some concerns of a pullback in the U.S. stock market came into
play, even as stocks attracted substantial new funds, data from
the Investment Company Institute showed on Wednesday. 
    The inflows into bond funds in the week ended Feb. 12 were
the biggest in five weeks and the first net inflows in four
weeks, the data from ICI, a U.S. mutual fund trade organization,
showed. In the previous week, the bond funds had outflows of
about $2.9 billion.
    Stock funds attracted about $7.3 billion in new cash,
marking their biggest inflows in four weeks. Funds that
specialize in U.S. stocks attracted $4.2 billion, while funds
that mainly hold non-U.S. stocks attracted $3.1 billion. 
    The week's inflows into bond funds 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. Bond yields move inversely to their prices. 
    In her first public comments as Fed chief on Feb. 11, Janet
Yellen emphasized continuity in the U.S. central bank's monetary
policy, saying the Fed was on track to keep reducing its
stimulus. Yellen's comments reassured investors that the U.S.
economy was on a better track, which limited demand for
safe-haven bonds.
    U.S. stocks rallied on Yellen's comments. The benchmark
Standard & Poor's 500 stock index rose 3.9 percent over
the reporting period, driving the inflows into stock funds. 
    Despite losses on benchmark bonds, bond funds attracted new
cash on fears that the U.S. stock market could suffer a steeper
correction from last year's record highs. The S&P 500 is down
about 0.4 percent so far this year, but some investors have
cautioned of a bigger drop ahead. 
    "It wouldn't be surprising for some investors to sell some
of the recent strength in equities and increase their downside
protection by putting cash into bond funds," said Alan Gayle,
senior investment strategist at RidgeWorth Investments. 
    Hybrid funds, which can invest in stocks and fixed-income
securities, attracted $1.9 billion in new cash, marking their
biggest inflows since late October. 
    The following data shows estimated ICI flows for the past
five weeks (all figures in millions of dollars):
                  1/15/2014     1/22      1/29      2/5     2/12
 Total Equity         8,040    6,452     5,398    1,726    7,257
    Domestic          4,242    2,493     1,881   -1,727    4,159
    World             3,798    3,959     3,517    3,453    3,097
 Hybrid*              1,055    1,642     1,738    1,385    1,874
 Total Bond             967     -261      -938   -2,860    1,130
    Taxable             727     -382    -1,448   -3,006      968
    Municipal           239      121       510      146      162
 Total               10,062    7,833     6,198      251   10,261
 *Hybrid funds can invest in stocks and/or fixed income
securities.
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