December 31, 2013 / 8:37 PM / 4 years ago

U.S.-based bond funds post $3.6 billion outflow in latest five days: ICI

NEW YORK (Reuters) - Investors in U.S.-based mutual funds pulled $3.6 billion out of bond funds in the five days ended December 23, data from the Investment Company Institute showed on Tuesday.

The outflows also marked the 13th straight week of withdrawals from the funds, the data from ICI, a U.S. mutual fund trade organization, showed.

The five-day stretch began December 19, one day after the Fed decided to cut its bond purchases by $10 billion a month to $75 billion a month at the end of its two-day meeting on December 18.

Investors began pulling cash out of bond funds in early June on fears that a pullback in the Fed’s bond-buying program would cause a spike higher in interest rates, thereby hurting bond prices, ICI data show.

Fed Chairman Ben Bernanke triggered a bond market selloff and outflows from bond funds when he told Congress on May 22 that the central bank could begin reducing its stimulus if the U.S. economy looked strong enough.

Investors also added $254 million into funds that mainly hold U.S. stocks over the five-day period, the first net inflow after four weeks of pulling out money.

Funds that specialize in stocks of companies outside the United States, meanwhile, brought in $1.53 billion. The funds have attracted new cash over every weekly period since the start of May, ICI data show.

The Standard & Poor's 500 .SPX stock index rose about 1 percent from the close of December 18 to the close of December 23.

The S&P 500’s roughly 29 percent rally this year has resulted in record inflows into stock funds, while a spike in interest rates after Bernanke signaled in May that the Fed could start reducing its stimulus has resulted in record outflows from bond funds.

U.S.-based stock mutual funds and exchange-traded funds have attracted $349 billion this year through December 24, a record according to data from research provider TrimTabs Investment Research. Investors have pulled a record $73 billion from bond mutual funds and ETFs, meanwhile, data from TrimTabs showed.

Hybrid funds, which can invest in stocks and fixed income securities, brought in $875 million, according to the ICI data.

Reporting by Luciana Lopez and Sam Forgione; Editing by James Dalgleish

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