U.S.-based bond funds attract most cash in six weeks -ICI
By Sam Forgione NEW YORK, June 25 (Reuters) - Investors poured $4.2 billion into U.S.-based bond funds in the week ended June 18 on geopolitical concerns and the view that the Federal Reserve had maintained a dovish stance on monetary policy, data from trade organization Investment Company Institute showed on Wednesday. The inflows were the biggest in six weeks and more than double those of the prior week, according to the data. Stock funds posted $914 million in net outflows. "I wouldn't say structurally there has been a major change in the attractiveness of bonds to a lot of people," said James Swanson, chief investment strategist at Boston-based MFS Investment Management. Bond funds have attracted 19 straight weeks of inflows, according to ICI data. The benchmark U.S. 10-year Treasury note yield fell about three basis points to 2.62 percent after the Fed's June 18 policy decision, underscoring the view that the central bank is unlikely to raise interest rates anytime soon. Bond yields move inversely to prices. The net outflow from stock funds was the first in three weeks. Funds that specialize in U.S. stocks posted $2.2 billion in outflows, modestly below the prior week's but still marking their eighth straight week of withdrawals. The outflows came even as the benchmark Standard & Poor's 500 stock index closed at a record high on June 18, the day of the Fed decision, and rose 0.7 percent over the weekly period. Robert Francello, head trader at Apex Capital in San Francisco, cited conflicts stemming from a mounting Sunni insurgency in Iraq that threatens to dismember the country. "All the geopolitical concerns, coupled with the possibility of a slightly more hawkish tone for the Fed going into the meeting, caused people to take some chips off the table in stock funds," he said. Funds that specialize in stocks from other countries attracted $1.3 billion in new cash, marking their weakest demand in three weeks. Hybrid funds, which can invest in stocks and fixed income securities, attracted $1.1 billion in new cash in their sixth straight week of inflows. The following table shows ICI's estimates of flows for the past five weeks, with all figures in millions of dollars: 6/18/14 6/11 6/4 5/28 5/21 Total equity -914 217 2,084 -2,452 697 Domestic -2,193 -2,860 -1,163 -2,605 -1,790 World 1,280 3,077 3,247 152 2,487 Hybrid 1,060 1,156 1,123 1,109 1,216 Total bond 4,162 2,065 207 2,047 2,196 Taxable 3,743 1,540 -452 1,242 1,398 Municipal 419 525 660 805 798 Total 4,308 3,438 3,414 703 4,109 (Reporting by Sam Forgione; Editing by Lisa Von Ahn)
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