U.S.-based bond funds attract $659 mln, lowest in 10 wks -ICI

Wed Apr 23, 2014 12:17pm EDT

NEW YORK, April 23 (Reuters) - Investors in U.S.-based
mutual funds committed just $659 million to bond funds in the
week ended April 16 while continuing to pour cash into stock
funds amid reduced demand for low-yielding bonds, data from the
Investment Company Institute showed on Wednesday. 
    The net inflows into bond funds, while marking the 10th
straight week of new money, were the lowest in those 10 weeks,
according to the data from ICI, a U.S. mutual fund trade
organization. Stock funds attracted $2.3 billion over the weekly
period. 
    "There is a little less attraction to get into bonds after
interest rates have fallen this year," said Richard Sichel,
chief investment officer of Philadelphia Trust Co. The belief
that stocks could rally further this year drove inflows into
stock funds, he said.
    Analysts have attributed a drop in Treasuries yields this
year to relief after the Federal Reserve's cuts to its monthly
bond-buying program failed to trigger a spike higher in yields.
    As of the end of ICI's reporting period, the yield on the
benchmark 10-year U.S. Treasury note had fallen about 36 basis
points since the start of the year to 2.64 percent. Demand for
bond funds has also recovered after a record $83.4 billion in
outflows last year, according to ICI data.
    The net inflows into stock funds, while marking the fourth
straight week of new cash and trouncing inflows into bond funds,
were still less than half the previous week's inflows after a
selloff in technology and biotech shares.
    Funds that specialize in U.S. stocks attracted just $636
million in new cash after inflows of $2.1 billion over the prior
week, while funds that hold non-U.S. stocks attracted $1.65
billion in new cash. 
    Investors sold tech and biotech shares early in the week on
the view that high-flying momentum stocks such as TripAdvisor
 were overvalued. The benchmark Standard & Poor's 500
 stock index fell 0.53 percent over the week. 
    The Nasdaq composite index, which is heavily
composed of technology company shares, fell 3.1 percent on April
10 in its largest daily percentage drop since November 9, 2011.
The index fell 2.3 percent over the week.
    Hybrid funds, which can invest in stocks and fixed income
securities, attracted $1.2 billion in new cash. That was
modestly less than the prior week's inflows but still the 17th
straight week of inflows.
    The following table shows estimated ICI flows for the past
five weeks (all figures in millions of dollars) :
                 3/19/2014     3/26      4/2     4/9     4/16
 Total equity         -987    1,257    3,165   5,762    2,288
    Domestic        -3,823     -266      950   2,082      636
    World            2,836    1,523    2,215   3,679    1,652
 Hybrid*             1,857    1,013      220   1,529    1,165
 Total bond          2,470    1,232    3,412   1,577      659
    Taxable          2,233    1,190    3,162   1,415      630
    Municipal          237       42      250     161       29
 Total               3,340    3,502    6,797   8,867    4,112
 
*Hybrid funds can invest in stocks and/or fixed income
securities. 

 (Reporting by Sam Forgione; Editing by Meredith Mazzilli)