NEW YORK (Reuters) - Investors soured on both stock and bond funds during the week ended Nov. 11, as rising yields punished U.S. fund managers against the backdrop of increasing expectations of a December interest rate hike from the Federal Reserve.
Taxable bond funds based in the United States posted $3.7 billion in outflows during the week, Lipper said, as the average fund that reported performance to Lipper saw markets trim their value by 64 basis points. The latest cash withdrawals were the category’s worst results since the week that ended Sept. 30, according to Lipper.
The funds were hurt as U.S. rates spiked, with yields on the benchmark U.S. 10-year Treasury note climbing from 2.230 percent on Nov. 4 to 2.315 percent on Thursday. Bond yields move inversely to their prices.
“The market is showing some concern on the direction of interest rates,” said Jeff Tjornehoj, head of Americas research at Lipper. Friday’s blowout jobs report, with October payrolls posting the best result since last December, triggered the sell-off in bonds.
Investors’ disfavor with rising rates appeared to extend to other asset classes, including emerging markets, a category that includes debt-laden countries dependent on cheap borrowing rates and hobbled by weak commodity prices.
Emerging-markets equity funds posted $493 million in outflows, while their debt-holding counterparts saw $357 million in outflows.
“Not only did investors back away from domestic issues, but emerging-markets investors also read the tea leaves on higher interest rates, and they pulled money out,” said Tjornehoj.
U.S.-based stock funds experienced their first outflows in five weeks, despite relatively light trading during a week that included the U.S. Veterans Day holiday.
Those mutual fund and exchange-traded funds posted $1 billion in outflows during the week, Lipper said, driven by outflows in funds that focus on U.S.-listed stocks.
Domestic equities funds posted $3.2 billion in outflows, while non-domestic stock funds took in $2.1 billion, Lipper said.
Domestically, the pain was spread around, with all the large sector funds tracked by Lipper seeing outflows except for those focused on technology. Technology funds attracted $350 million in inflows, continuing a five-week streak, according to Lipper.
The fund research service said safe-haven money-market funds attracted $6.5 billion during the period, following outflows of nearly $14 billion the week before.
Among bonds, high-yield funds broke a five-week streak of inflows, posting $1.8 billion in outflows, Lipper said. The SPDR Barclays High Yield ETF posted $1.2 billion in outflows during the week.
The Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.
Reporting by Trevor Hunnicutt; Editing by Ken Wills, Jennifer Ablan and David Gregorio