By Alison Griswold
June 14 Investors pulled a record $14.45 billion
from bond funds tracked by EPFR Global in the latest week on
fears the Federal Reserve could soon start reducing its massive
stimulus program, data from EPFR showed on Friday.
Mutual fund investors also withdrew more than $8 billion
from stock funds, with emerging markets funds incurring their
biggest redemptions of the year for the week ended June 12, EPFR
In the fixed-income space, the heavy redemptions came on the
heels of a previously record-setting $12.53 billion outflow from
all EPFR-tracked bond funds the week before. High-yield bond
funds had outflows of $6.48 billion, the second most since EPFR
began tracking the funds in May 2003.
The outflows coincided with the latest leg of a bond market
selloff underway since early May. U.S. bonds broadly have
suffered losses of 2.55 percent on a total return basis since
May 2, according to the Bank of America/Merrill Lynch U.S.
Corporate, Government and Mortgage Index.
Investors remain nervous that the Fed might scale back its
$85 billion in monthly bond purchases in the coming months. The
central bank's chairman, Ben Bernanke, said on May 22 the Fed
could reduce its so-called quantitative easing program in the
"next few meetings," though a clearer picture may emerge after
Fed officials meet again next Tuesday and Wednesday.
"I think there's nervousness about the upcoming Fed meeting
and I think what spooked investors was the recent rise in
interest rates, and that's what's caused the big selloff in
bonds," said Ian Wilson, managing director for fund data at
Bond prices fell during EPFR's reporting period and the U.S.
10-year Treasury yield rose to 2.228 percent from 2.091 percent,
an increase of almost 14 basis points.
Emerging market bond funds were also hard hit during the
latest week, recording $2.53 billion in outflows, their
second-greatest weekly outflow on EPFR's books. Wilson said
emerging markets are being affected by both news that China's
economy is growing at a rate below expectations and by dollar
All U.S. bond funds had outflows of $8.51 billion. U.S.
municipal bond funds had redemptions of $1.7 billion.
In stocks, emerging markets equity funds had their largest
outflow of the year with investors pulling $5.76 billion. All
equity funds saw net outflows of $8.51 billion.
Emerging market stocks have been pummeled since mid-May. The
MSCI Emerging Markets Index has fallen for five weeks
in a row, losing 9.2 percent over that run.
Investors continued to put money into Japanese equities, but
the $345 million inflow was smaller than those of previous
weeks. Japanese equities had inflows between $1 billion and $7
billion from the week of April 17 to the week of May 22, peaking
at $6.79 billion in inflows during the week ended May 15.
The inflows come despite a vicious selloff in Japan's
benchmark Nikkei Index, which has fallen more than 20
percent in the past 16 days of trading.
EPFR Global tracks 49,000 mutual funds worldwide that
include ETFs and alternative funds and make up $20.5 trillion in
assets under management.