(Adds analyst comments, additional flows, byline)
By Sam Forgione
NEW YORK, April 25 Fund investors worldwide
poured $3.3 billion into bond funds in the week ended April 23,
outpacing inflows into stock funds on outperformance in bonds
this year, data from a Bank of America Merrill Lynch Global
Research report showed on Friday.
The inflows over the holiday-shortened week marked the
seventh straight week of new demand for bond funds, according to
the report, which also cited data from fund-tracker EPFR Global.
Stock funds attracted $2.9 billion in inflows over the week.
Investors reached for higher-yielding credits and poured $1
billion into high-yield junk bond funds, marking the 11th
straight week of inflows into the funds and dwarfing the prior
week's inflows of $100 million.
"Bond returns, especially for high yield and for credit,
seem to have been pretty strong," said Keith Berlin, director of
fixed income at investment advisory firm Fund Evaluation Group
in Cincinnati, Ohio.
The benchmark Barclays U.S. Aggregate bond index has risen
2.5 percent this year through Thursday, while the Barclays U.S.
Corporate High Yield index has risen 3.5 percent. The benchmark
Standard & Poor's 500 stock index has risen just 1.6
percent over the same period.
"The credit markets are in the process of moving from greed
to extreme greed," Berlin said. "People buying high yield right
now are not being compensated well for the risk," he said.
Berlin said his firm recommended selling high-yield bonds in
Emerging market bond funds attracted $200 million, marking
their fourth straight week of inflows. Floating-rate loan funds,
which are protected from rising interest rates by being pegged
to floating-rate benchmarks, posted $200 million in outflows,
the first time since June 2012 that the funds have seen an
outflow for two straight weeks.
Analysts have said that recent dovish comments from the
Federal Reserve have eased fears that the central bank will hike
interest rates sooner than expected, sapping demand for
floating-rate loan funds.
The inflows into stock funds marked their fourth straight
week of new demand. Emerging market stock funds attracted $400
million in new money, marking their fourth straight week of
inflows, while European stock funds attracted $1.2 billion,
marking their 43rd straight week of inflows.
"This should be the first year of meaningfully positive
earnings growth in Europe," said Chris Konstantinos, head of
international portfolio management at RiverFront Investment
Group in Richmond, Virginia.
He said that sentiment toward emerging market stocks picked
up after hitting a "pessimistic extreme." Investors sold
emerging market stocks and pulled cash out of emerging market
stock funds in much of the first quarter of this year.
Funds that specialize in U.S. stocks posted outflows,
meanwhile, of $500 million. The outflows were all via mutual
funds and marked the second straight week of withdrawals,
despite a rebound in U.S. stocks over the weekly period.
"The U.S. has been the best performing major market in the
last five years by a long shot," said Konstantinos of
RiverFront. "Increasingly, investors are going to be looking
overseas for value," he said.
The benchmark Standard & Poor's 500 stock index
recovered 0.7 percent over the weekly period after having fallen
1.5 percent over the previous two weeks.
Money market funds, which typically invest in safe
short-term securities, attracted $15 billion in inflows, marking
their first inflows in six weeks. Investors have pulled $103
billion out of the funds so far this year, according to the
report. Investors have pulled cash out of the funds in recent
weeks to pay income taxes, analysts have said.
Precious metals funds posted small outflows of $75 million
after attracting $100 million in inflows the previous week. Gold
prices fell to a 2-1/2-week low on April 21 on strength in the
U.S. dollar and outflows from the world's biggest bullion-backed
(Reporting by Sam Forgione; Editing by Chizu Nomiyama)