November 7, 2018 / 7:00 PM / 9 months ago

Investors pull $18.5 billion from U.S. bond funds in one week: ICI

NEW YORK (Reuters) - U.S. fund investors fled bonds at the fastest pace since 2013 in the final week of October, worried about rising interest rates and tightening monetary policy, Investment Company Institute (ICI) data showed on Wednesday.

More than $18.5 billion of mutual fund and exchange-traded fund assets flowed out the debt market during the week ended Oct. 31, the most since the “Taper Tantrum” panic of June 2013, when markets worried about the U.S. Federal Reserve planning to stop buying bonds.

Fed policy has again helped drive investors to reconsider their bond holdings after pouring hundreds of billions of dollars into debt products since the 2007-2009 global financial crisis. The latest withdrawals marked a fourth straight week of outflows, according to the trade group.

U.S. Federal Reserve policymakers seem on course to deliver their fourth rate hike of the year in December - the most in any calendar year since 2006 - while letting the Fed’s large holdings of bonds accumulated during the financial crisis roll off.

“When rates rise from a very low level, bond yields and stocks can go up at the same time,” said David Kelly, chief global strategist at JPMorgan Chase & Co’s funds business.

Investors added the most cash in six weeks - $5.6 billion - to stock funds during the same week as strong quarterly earnings reports rolled in, ICI said. Year-over-year profit growth for the S&P 500 is at 27.7 percent, with most companies beating Wall Street forecasts, according to Refinitiv IBES data.

Reporting by Trevor Hunnicutt; Editing by Dan Grebler

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