March 1, 2018 / 11:48 PM / 21 days ago

U.S.-based junk bond funds post seventh straight week of outflows

NEW YORK (Reuters) - U.S.-based junk bond funds posted $703 million of outflows for the week ended Wednesday, their seventh straight week of cash withdrawals, Lipper data showed on Thursday.

But higher up in the credit-quality spectrum, U.S.-based investment-grade corporate bond funds attracted $1.37 billion in new cash, a second consecutive week of inflows, Lipper added.

U.S.-based equity funds attracted $13.3 billion of net cash for the week ended Wednesday, though the majority of those flows went into U.S.-based exchange-traded funds, Lipper said.

U.S.-based equity ETFs attracted $13.6 billion of inflows, while U.S.-based mutual funds posted $295 million of outflows, Lipper said. Overall, U.S.-based domestic funds attracted $9.4 billion of inflows, after three straight weeks of cash withdrawals.

“Investors appeared to be cautiously optimistic ahead of Federal Reserve Chair Powell’s testimony to Congress but then became spooked by his, what some people are calling, ‘hawkish’ tone,” said Tom Roseen, head of research services at Thomson Reuters Lipper.

Jerome Powell gave his first testimony as the Fed chair before Congress on Tuesday.

“But from the flows into equity ETFs, we can see that many investors are cheering the idea of a stronger economy and perhaps rotating into those securities that benefit when rates increase - banks and the like - and increasing economic conditions,” Roseen said.

Roseen said while domestic ETFs took in money, conventional domestic funds were net redeemers. The average retail investor continued to shun large-cap stocks, while padding the coffers of international equity funds.

Indeed, U.S.-based international equities funds attracted $4.2 billion of inflows for the week ended Wednesday, a ninth consecutive week of inflows, according to Lipper data. U.S.-based emerging markets equity funds attracted $1.5 billion of inflows for the week ended Wednesday, their 10th consecutive week of inflows, Lipper added.

U.S.-based European equity funds attracted $117 million for the week ended Wednesday, their sixth straight week of inflows, Lipper said.

Reporting by Jennifer Ablan; Editing by Lisa Shumaker and Leslie Adler

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