| NEW YORK
NEW YORK May 3 Investors worldwide continued to
pour cash into bond funds in the latest week, with over $7
billion flowing into the funds despite the S&P 500 hitting
record highs, data from EPFR Global showed on Friday.
The demand for bond funds in the week ended May 1 was more
than triple the demand for stock funds at $2.24 billion, the
fund-tracking firm said. It also showed strong momentum for bond
funds after they took in $7.58 billion the prior week, which was
the most in 23 weeks.
Investor appetite for riskier debt increased, with a record
$3 billion flowing into funds that hold European bonds.
Investors had anticipated that the European Central Bank would
cut interest rates to stimulate the euro zone's indebted
economy, which the bank did on May 2 by lowering its main rate
to a record low of 0.50 percent.
"There is more confidence at this point," said Richard
Sichel, who oversees $1.5 billion as chief investment officer of
Philadelphia Trust Co, on the demand for European bonds. "There
is more of a feeling these days that the weaker countries will
get through it," he added.
High-yield "junk" bond funds also grabbed $2.2 billion in
new cash from investors, the most in 31 weeks according to EPFR
"It seems to indicate yield hunger," said Cameron Brandt,
director of research at the fund-tracker. He added that the
Federal Reserve and European Central Bank's stimulus measures
are chasing money out of low-yielding vehicles without coaxing
large sums of investor cash into stock funds.
The more than $7 billion into bond funds excludes $2.3
billion that was raised in the initial public offering of the
DoubleLine Income Solutions Fund, which was the second
largest sum ever raised in a closed-end bond fund offering.
Including that amount, the $10.3 billion of new cash into bond
funds over the week was a weekly record, EPFR Global said.
The inflows into bond funds came despite the benchmark S&P
500 U.S. stock index hitting record closing highs on
April 29 and 30. Still, the index rose just 0.25 percent over
the reporting period amid weaker-than-expected U.S. economic
growth and a report that private employers added just 119,000
jobs in April.
Improved data on U.S. unemployment benefit claims at the
April 25 start of the EPFR's reporting week and expectations
that the U.S. Federal Reserve would keep its $85 billion
bond-buying program unchanged at a two-day meeting boosted
stocks over the period, however.
The Federal Reserve announced on Wednesday that it will
continue buying $85 billion in bonds per month to drive down
interest rates and spur economic growth. The central bank also
said that it would increase its purchases if needed.
The benchmark 10-year U.S. Treasury was up in price to yield
1.64 percent at the end of EPFR Global's reporting period. The
yield on the safe-haven bond subsequently rose to 1.74 percent
at the close of trading on Friday after the U.S. government
reported jobs growth for April that topped expectations.
Among stock funds, those that hold only U.S. stocks raked in
just $1.46 billion over the period, with all of the cash
stemming from opportunistic bets on stock exchange-traded funds.
Stock mutual funds, which are mainly known to attract mom and
pop investors, suffered over $3 billion in outflows.
The modest inflows into stock funds were still an
improvement from the prior week, when investors yanked $3.73
billion out of stock funds globally. That was the first week of
outflows from the funds since November of last year.
Outflows from money market funds, which are low risk
vehicles that invest in short-term securities, continued with
investors pulling over $21 billion from the funds in the latest
"Money market rates are close to nil," said Sichel of
Philadelphia Trust Co. "Investors are more willing to use some
of their funds in higher risk and higher reward," he added.