By Sam Forgione
NEW YORK Jan 10 Investors poured $5.3 billion
into bond funds worldwide in the latest week while pulling
profits out of stock funds after market gains in 2013, data from
a Bank of America Merrill Lynch Global Research report showed on
The inflows into bond funds in the week ended Jan. 8 marked
the biggest cash surge since May of last year, while stock funds
posted outflows of $400 million. Demand stumbled for funds that
mainly hold U.S. stocks, which posted outflows of $2.2 billion.
Investors sought bonds with varying degrees of risk.
Investment-grade bond funds, which are viewed as safer given
their higher-quality credit ratings, attracted $3 billion.
Riskier high-yield junk bond funds, meanwhile, attracted $1
billion, according to the Bank of America Merrill Lynch report,
which also cited data from fund-tracking firm EPFR Global.
The demand for bond funds in the first week of 2014 could
mark a reversal in sentiment toward bonds, which sold off last
year on worries of a pullback in the U.S. Federal Reserve's $85
billion in monthly bond-buying stimulus.
"As investors take some money off the table in equities,
that inevitably forces them into bonds," said Omer Esiner, chief
market analyst at Commonwealth Foreign Exchange in Washington
Investors also poured nearly $23 billion into money market
funds, which are low-risk vehicles that invest in short-term
securities, data from EPFR Global showed. That demand lifted
inflows into the funds to more than $65 billion over the past
three weeks, according to EPFR Global.
"With the (stock) market going down, they're just parking it
in money markets," said Alan B. Lancz, president of investment
advisory firm Alan B. Lancz & Associates Inc. referring to the
decline in U.S. stocks at the start of the year.
Bond funds worldwide attracted a meager $1.4 billion in new
cash last year after being hit by persistent withdrawals from
the funds, according to data from Bank of America Merrill Lynch
and EPFR Global reported by Reuters last week.
Inflows into riskier junk bond funds marked the third
straight week of new demand for the funds. Funds that hold
government debt, mainly safe-haven U.S. Treasuries, attracted
$900 million, marking their largest inflow in 18 weeks.
Despite the appetite for bond funds, the yield on the
10-year U.S. Treasury barely budged over the weekly
period and ended at 2.99 percent.
That was still down slightly from a near 2-1/2-year high
yield of 3.04 percent more than a week earlier, when investors
sold bonds to brace for a cutback in the Fed's stimulus in
January. Bond yields move inversely to their prices.
The outflows from stock funds reversed sizable inflows of
$4.4 billion into the funds the prior week, which brought
inflows to a record $251 billion in 2013. The Fed's bond-buying
program kept interest rates low, fueling a record-breaking rally
in U.S. stocks and inflows into stock funds.
The outflows of $2.2 billion from funds that specialize in
U.S. stocks were the first in three weeks, according to data
from Bank of America Merrill Lynch and EPFR Global.
The Standard & Poor's 500 stock index fell 0.5
percent over the weekly period. Investors were cautious, despite
data released Wednesday from payrolls processor ADP showing U.S.
private employers added a higher-than-expected 238,000 jobs in
December, the strongest increase in thirteen months.
Some investors were taking profits after the S&P 500 rallied
29.6 percent in 2013, marking its best year since 1997.
"It will be difficult to repeat the S&P 500's gain," said
Alan Gayle, senior investment strategist at RidgeWorth
investments. "We would not be surprised if there were a pullback
over the near term."
Funds that hold Japanese stocks stood out, with inflows of
$1.7 billion, marking the largest inflows since May of last year
despite a 1.2 percent decline in Japan's Nikkei average
over the weekly period.
Emerging market stock funds posted outflows of $1.3 billion,
marking 11 straight weeks of outflows from the funds. That
marked the longest outflow streak in 11 years, according to the
Bank of America Merrill Lynch report.
The MSCI Emerging Markets Index of global emerging
market equities fell 2.7 percent over the reporting
Commodities funds, which mainly hold physical gold, posted
outflows of $36 million. That marked the ninth straight week of
withdrawals from the funds.
Gold prices rose at the start of the period after weaker
equities spurred demand for the safe-haven. But prices declined
in the last two days on the upbeat U.S. private-sector jobs
report and data showing the lowest U.S. trade deficit in four