Investors in funds based in the United States poured a net $3.34 billion into stock mutual funds in the latest week on reassurance from Federal Reserve chair Janet Yellen that the U.S. economy was on a better track.
The inflows into stock mutual funds in the week ended February 12 marked the eighth consecutive week of inflows into the funds, data from Thomson Reuters' Lipper service showed on Thursday. Investors also committed $3.5 billion to equity ETFs following a net $22.4 billion outflow from these instruments the previous week.
Investors in exchange-traded funds are thought to represent the institutional investor, including hedge funds. Mutual funds are thought to represent retail investors.
Overall, stock funds attracted $6.9 billion in new cash, reversing the prior week's big outflows of $20.9 billion.
The inflows into stock funds came after Yellen, in her first public comments as Fed chief, emphasized continuity in the U.S. central bank's policy strategy of cutting asset purchases by $10 billion a month.
U.S. stocks rallied on Yellen's comments, with investors interpreting the reduced need for the Fed's bond-buying as a positive sign for the U.S. economy.
"Yellen's testimony lifted the spirits of investors," said Jeff Tjornehoj, head of Americas research at Lipper.
The benchmark Standard & Poor's 500 stock index rallied 3.9 percent over the reporting period.
Emerging market stock funds had outflows of $350 million, however, marking the fifth straight week of withdrawals from the funds.
Investors are still avoiding the funds after concerns of a capital flight out of emerging markets triggered volatility in emerging market stocks in recent weeks, Tjornehoj said.
"The tolerance of emerging market assets is growing thin because their performance has been rocky," he said.
Taxable bond funds attracted $6.7 billion in new cash, marking the sixth straight week of new money into the funds, despite a slide in Treasuries prices.
The yield on the 10-year U.S. Treasury note rose 14 basis points to 2.76 percent over the weekly period after Yellen's comments, some positive U.S. jobless data, and a U.S. debt ceiling deal limited demand for safe-haven bonds. Bond yields move inversely to their prices.
Funds that mainly hold U.S. Treasuries attracted $703 million of the new cash into taxable bond funds, marking their fourth straight week of inflows.
"The current environment is dispelling the notion of a rise in interest rates," said Tjornehoj on the inflows into bond funds.
He said that, despite the rise in Treasuries yields over the latest week, interest rates have not skyrocketed as some investors anticipated.
Funds that hold riskier high-yield junk bonds attracted about $1.5 billion in new cash, reversing the prior week's mid-October. Since high-yield bonds and stocks are viewed as risk assets, funds that hold the assets tend to attract inflows simultaneously.
Commodities and precious metals funds, which mainly invest in gold futures, attracted a slight $86 million in new cash, marking their second straight week of inflows.
From the beginning of the year through Wednesday, gold had gained around 7.0 percent, propped up by concerns about emerging markets and about economic growth in China.
The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.
The following is a broad breakdown of the flows for the week, including exchange-traded funds (in $ billions):
Sector Flow Chg % Assets Count
($Bil) Assets ($Bil)
All Equity Funds 6.855 0.19 3,852.766 10,634
Domestic Equities 4.534 0.16 2,875.273 7,814
Non-Domestic Equities 2.322 0.25 977.494 2,820
All Taxable Bond Funds 6.658 0.40 1,692.833 5,350
All Money Market Funds 5.489 0.23 2,415.538 1,326
All Municipal Bond 0.082 0.03 277.830 1,415
(Reporting By Sam Forgione; Editing by Jennifer Ablan and Clive McKeef)