NEW YORK (Reuters) - Investors in U.S.-based funds pulled $6.7 billion out of taxable bond mutual funds in the week ended Sept. 30, the group’s second-largest weekly outflows on record and the biggest weekly outflows from the funds since October 2008.
“This week’s outflows from bond mutual funds surprised me in terms of its scale - second-largest on record - and diversity, meaning the selling was spread across categories and companies,” said Jeff Tjornehoj, head of Americas research at Lipper, a Thomson Reuters company.
“Investors are getting out of these bond funds because of fear. An unfounded fear, in my opinion, of higher rates and a global recession.”
In her speech last week, Federal Reserve chair Janet Yellen said she expects the U.S. central bank to begin raising interest rates later this year as long as inflation remains stable and the U.S. economy is strong enough to boost employment.
Investors in U.S.-based funds pulled $3.6 billion out of investment-grade corporate bond funds in the week, marking the biggest weekly outflows from the funds since records began in 1992, data from Thomson Reuters’ Lipper service showed on Thursday. High-yield bond funds posted $2.2 billion in outflows to mark their biggest withdrawals since the week ended July 1.
Investors aversion to risk-taking led them into portfolios that hold cash and cash-equivalents.
Low-risk money market funds attracted $6.7 billion to mark their second straight week of new demand.
Conversely, stock funds posted $910 million in outflows to mark their second straight week of withdrawals. U.S.-based domestic-focused stock funds posted $490 million of outflows, the group’s second straight week of outflows, according to Lipper. For their part, U.S.-based non-domestic-focused stock funds posted $420 million of net withdrawals, their first outflows in three weeks, Lipper added.
Emerging markets had another rough week. U.S.-based EM equity funds posted $759 million of outflows and U.S. based EM debt funds saw $309 million of outflows, their biggest cash withdrawals in five weeks, Lipper said.
Reporting by Sam Forgione; Editing by Jennifer Ablan and Tom Brown