NEW YORK (Reuters) - U.S.-based taxable-bond funds took in $7 billion during the latest week, the largest weekly intake since July, adding to an already strong year for debt against the backdrop of a rate-hiking cycle, Lipper data showed on Thursday.
Even in a week with big inflows for technology stocks, U.S. fund investors continue to favor debt over equity. The Federal Reserve on Wednesday announced plans to reduce its own bond holdings, marking a historic shift from the ultra-easy monetary policy it had adopted since the 2007-2009 global financial crisis.
Taxable-bond mutual funds and exchange-traded funds (ETFs) have now brought in nearly $219 billion this year in the United States, according to Thomson Reuters’ Lipper research unit.
But that is not a bubble, said Matthew Forester, chief investment officer for Lockwood Advisors Inc., part of the Bank of New York Mellon Corp.
“Market prices should already reflect Fed decisions,” said Forester. “Debt, demographics and technology-driven disinflation all work to suppress long-term rates.”
Bond prices rise as rates fall.
Financial sector funds, which are seen profiting from higher rates, also pulled in their largest week of inflows since July, at $530 million. Real estate sector funds, by contrast, posted $407 million in outflows during the week ended Sept. 20, their largest withdrawals since June.
U.S.-based stock funds pulled in $803 million, according to Lipper.
U.S.-based technology sector stock funds pulled in $1.1 billion, their largest week of inflows since September 2006.
The VanEck Vectors Semiconductor ETF attracted $420 million during the week, the third most on record for the ETF.
The iShares North American Tech-Software ETF pulled in $176 million, while the Technology Select Sector SPDR Fund gathered $138 million.
Nvidia Corp shares hit a record high this month as analysts noted the semiconductor firm’s progress in artificial intelligence.
However, they took a bit of a hit on Thursday on reports that Tesla Inc was working with Advanced Micro Devices Inc to develop a chip for self-driving cars. One of AMD’s chipmaking partners later denied that report.
Apple Inc, the biggest holding in the broad tech sector ETF, last week rolled out its iPhone X, a glass and stainless steel device with an edge-to-edge display, along with a smartwatch. However, mixed reviews for the new watch weighed on the company’s shares.
Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and Rosalba O'Brien