By Alison Griswold
June 14 (Reuters) - 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 said.
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 EPFR.
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 weakness.
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.