June 25, 2014 / 5:05 PM / 6 years ago

U.S.-based bond funds attract most cash in six weeks -ICI

By Sam Forgione
    NEW YORK, June 25 (Reuters) - Investors poured $4.2 billion
into U.S.-based bond funds in the week ended June 18 on
geopolitical concerns and the view that the Federal Reserve had
maintained a dovish stance on monetary policy, data from trade
organization Investment Company Institute showed on Wednesday. 
    The inflows were the biggest in six weeks and more than
double those of the prior week, according to the data. Stock
funds posted $914 million in net outflows. 
    "I wouldn't say structurally there has been a major change
in the attractiveness of bonds to a lot of people," said James
Swanson, chief investment strategist at Boston-based MFS
Investment Management. Bond funds have attracted 19 straight
weeks of inflows, according to ICI data. 
    The benchmark U.S. 10-year Treasury note yield
fell about three basis points to 2.62 percent after the Fed's
June 18 policy decision, underscoring the view that the central
bank is unlikely to raise interest rates anytime soon. Bond
yields move inversely to prices.
    The net outflow from stock funds was the first in three
    Funds that specialize in U.S. stocks posted $2.2 billion in
outflows, modestly below the prior week's but still marking
their eighth straight week of withdrawals. The outflows came
even as the benchmark Standard & Poor's 500 stock index 
closed at a record high on June 18, the day of the Fed decision,
and rose 0.7 percent over the weekly period.
    Robert Francello, head trader at Apex Capital in San
Francisco, cited conflicts stemming from a mounting Sunni
insurgency in Iraq that threatens to dismember the country. 
    "All the geopolitical concerns, coupled with the possibility
of a slightly more hawkish tone for the Fed going into the
meeting, caused people to take some chips off the table in stock
funds," he said. 
    Funds that specialize in stocks from other countries
attracted $1.3 billion in new cash, marking their weakest demand
in three weeks.
    Hybrid funds, which can invest in stocks and fixed income
securities, attracted $1.1 billion in new cash in their sixth
straight week of inflows.
    The following table shows ICI's estimates of flows for the
past five weeks, with all figures in millions of dollars:
                       6/18/14    6/11     6/4    5/28      5/21
 Total equity             -914     217   2,084  -2,452       697
    Domestic            -2,193  -2,860  -1,163  -2,605    -1,790
    World                1,280   3,077   3,247     152     2,487
 Hybrid                  1,060   1,156   1,123   1,109     1,216
 Total bond              4,162   2,065     207   2,047     2,196
    Taxable              3,743   1,540    -452   1,242     1,398
    Municipal              419     525     660     805       798
 Total                   4,308   3,438   3,414     703     4,109
 (Reporting by Sam Forgione; Editing by Lisa Von Ahn)
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