NEW YORK Investors in U.S.-based mutual funds poured $13.5 billion into stock funds in the latest week on expectations the Federal Reserve would keep its easy money policies intact into 2014, data from the Investment Company Institute showed on Wednesday.
The inflows into stock funds in the week ended October 23 marked the biggest weekly inflow into the funds since the week ended January 9, according to the data from ICI, a U.S. mutual fund trade organization.
Funds that hold U.S. stocks attracted $9.2 billion of the net inflows into stock funds, marking the biggest weekly inflow into the funds since ICI began tracking weekly mutual fund flows in January 2007.
Funds that hold non-U.S. stocks, meanwhile, attracted $4.36 billion in new cash, marking the biggest weekly inflows into the funds since mid-February.
Global stock markets rallied over the reporting period and benchmark 10-year Treasury yields fell after a U.S. budget deal shifted investors' focus to the timing of the Fed's reduction in its $85 billion in monthly bond-buying.
Weaker-than-expected U.S. jobs data bolstered expectations that the Fed would maintain its stimulus into 2014.
The Standard & Poor's 500 stock index hit record highs and rose 1.44 percent over the reporting week. MSCI's world equity index rallied 1.8 percent over the period.
Bond funds posted outflows of $2.3 billion over the weekly period, marking the fourth straight week of net outflows from the funds but down from outflows of $5.45 billion over the previous week.
The latest outflows came even as the yield on the benchmark 10-year U.S. Treasury note fell about 19 basis points to 2.49 percent over the week on the expectations of continued Fed stimulus. Bond yields move inversely to their prices.
Hybrid funds, which can invest in stocks and fixed income securities, attracted $2.32 billion in new money, marking the biggest inflows into the funds since mid-July.
In September, investors poured $45.6 billion into money market funds, marking the biggest monthly inflows into the funds since December 2012, data from ICI showed.
Money market funds attracted big inflows last month on uncertainty surrounding the Fed's plans for reducing its stimulus, along with concerns over looming U.S. debt talks, according to Tom Roseen, head of research services at Lipper.
Investors also committed $2.76 billion to stock funds in September, marking the weakest monthly turnout for the funds since they had outflows in December 2012, according to ICI data.
The modest inflows came even as the S&P 500 hit record highs in the wake of the Fed's decision on September 18 to maintain the pace of its bond-buying program.
Investors also pulled $11.33 billion from bond funds in September, marking the fourth straight month of outflows but less than outflows of $29.14 billion in August.
The outflows from bond funds in September continued despite reduced selling pressure on bonds. The yield on the 10-year U.S. Treasury note plunged 17 basis points following the Fed decision. As yields fall, bond prices rise.
The following data shows estimated ICI flows for the past five weeks (all figures in millions of dollars):
9/25/13 10/2/13 10/9/13 10/16/13 10/23/13 Total Equity -3,670 -3,356 -3,113 2,933 13,543
Domestic -3,855 -4,096 -5,184 832 9,185
World 186 740 2,071 2,101 4,358 Hybrid* 1,318 -52 191 619 2,315 Total Bond 1,766 -396 -2,550 -5,446 -2,322
Taxable 2,054 473 -1,521 -3,597 -1,300
Municipal -289 -869 -1,029 -1,849 -1,023 Total -586 -3,803 -5,472 -1,893 13,535 *Hybrid funds can invest in stocks and/or fixed income securities.
(Reporting by Sam Forgione; Editing by Meredith Mazzilli)