August 10, 2016 / 5:00 PM / 3 years ago

TABLE-Investor inflows into U.S. bond mutual funds highest in a year-ICI

By Trevor Hunnicutt
    NEW YORK, Aug 10 (Reuters) - Investors sought safety and
yield in corporate debt during the latest week, shoveling the
most money in more than a year into U.S.-based bond mutual
funds, Investment Company Institute data released on Wednesday
showed.
    The bond funds took in nearly $8 billion in the week ended
Aug. 3, according to ICI, the highest weekly inflow since the
week ended June 24, 2015, when a technical reclassification of
some assets rather than market activity lifted flows.
 
    The result was powered by a $4.8 billion haul by funds
invested in the highest-rated corporate debt.
    The bonds have rallied this year as fund buyers remain wary
of stocks and as investors in markets abroad where negative
yields are common have sought out the safer haven and earning
potential of U.S. debt.
    "We don't want to get punched in the nose," said Terri
Spath, chief investment officer of Sierra Investment Management
Inc, which invests in funds and has trimmed exposure to U.S.
stocks in favor of higher-yielding bonds. 
    "Any investment that has yield provides some kind of
cushion," she added.
    Meanwhile, the mutual-fund category that includes U.S.
Treasury debt saw inflows rise six-fold to $954 million during
the latest week, up from $136 million the week before, according
to ICI.
    But the strong overall numbers for bond funds also disguise
a weaker result for high-yield bond funds during the week.
    The iShares iBoxx $ High Yield Corporate Bond Exchange
Traded Fund posted $1.4 billion in outflows during the
period, while investors pulled $626 million from SPDR Barclays
High Yield Bond ETF, according to FactSet Research
Systems Inc.
    ETFs are used by a diverse group of investors and can paint
a more nuanced picture of market demand than mutual funds, which
are used more heavily by retail investors.
    Overall, including ETFs, bond funds took in a more moderate
$6.4 billion, ICI said, roughly offsetting the money that poured
out of stock funds.
    Withdrawals from U.S.-based international stock mutual funds
fell to $1.5 billion after hitting $2.9 billion the week before,
the fund trade group said. The prior week's number were the
funds' largest outflows since Britons voted in June to exit the
European Union. 
    U.S. investors have been shifting money from stocks to bonds
for most of this year. They pulled $65 billion from U.S.-based
stock mutual funds and ETFs in the first half of 2016, and
poured $104 billion into bond funds, ICI data shows.
    The following table shows estimated ICI flows for the past
five weeks, excluding ETFs (all figures in millions of dollars):
    
                  8/3     7/27     7/20     7/13    7/6/16
 Total equity  -8,962  -11,168  -12,618   -7,988    -2,880
  Domestic     -7,430   -8,225  -10,349   -7,218    -4,315
  World        -1,532   -2,943   -2,269     -770     1,435
 Hybrid          -123      475     -779   -1,106      -275
 Total bond     7,981    4,904    7,612    6,115     1,212
  Taxable       6,583    3,377    6,156    4,344       109
  Municipal     1,398    1,527    1,457    1,771     1,104
 Total         -1,104   -5,789   -5,784   -2,980    -1,942
 
    The following table shows estimated ICI flows, including
ETFs (all figures in millions of dollars):
                 8/3     7/27    7/20     7/13    7/6/16
 Equity       -6,992   -6,183  -8,142    9,504       531
  Domestic    -6,001   -4,135  -8,158    8,837     1,156
  World         -991   -2,047      16      667      -625
 Hybrid         -106      491    -761   -1,078      -291
 Bond          6,439    6,134   8,178   11,490     7,292
  Taxable      4,907    4,441   6,491    9,574     5,936
  Municipal    1,532    1,694   1,687    1,916     1,356
 Commodity       913     -362     486     -268     2,158
 Total           254       80    -240   19,648     9,690
 
 (Reporting by Trevor Hunnicutt, editing by G Crosse)
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