November 2, 2016 / 6:10 PM / 4 years ago

Investors poured cash into U.S. bond funds before corporate debt selloff -ICI

By Trevor Hunnicutt
    NEW YORK, Nov 2 (Reuters) - Investors poured $3.9 billion
into U.S.-based bond funds, a trade group's data showed on
Wednesday, dealing the funds their 17th straight week of netting
new cash shortly before a major corporate debt selloff.
   Bonds have been a popular bet this year, winning $123 billion
from U.S.-based mutual fund investors and $70 billion for
exchange-traded funds in that segment through September,
according to earlier data from the fund industry's Investment
Company Institute. 
    Markets have rewarded those investors, especially those
willing to bet on long-term bonds and speculative debt in the
beginning of the year.
    Both iShares 20+ Year Treasury Bond ETF (TLT) and
iShares iBoxx $ High Yield Corporate Bond ETF (HYG) are
sitting on low double-digit percentage gains for the year.
    The latest ICI data, which is for the week through Oct. 26,
did not capture more recent outflows, including a $1 billion
redemption BlackRock Inc reported from its HYG ETF on
Thursday.
    "Whenever you see this unwind in high yield, it tends to
happen all at once," said Mohit Bajaj, director of ETF trading
solutions at WallachBeth Capital LLC, a trading company.
    "As you get closer to year-end, no one knows how fast the
recovery will be," he added, referring to high yield bond ETF
prices.
    The U.S. Federal Reserve is widely expected to raise
interest rates in December. Rising rates could trim bond prices.
    Oil prices have fallen over the past two weeks. Energy firms
are a major component of high-yield bond indexes.
    The Nov. 8 U.S. presidential election is also weighing on
investors' willingness to take on risk in areas such as high
yield but could help government debt seen as a safe haven.
    Equity funds recorded $1.8 billion in withdrawals during the
week to Oct. 26, as continued selling by mutual fund investors
overpowered ETF investors' stock buying. 
    Commodity funds posted $831 million in withdrawals, their
largest outflows in six weeks, as investors made large
redemptions from SPDR Gold Shares (GLD).
    The following table shows estimated ICI flows, including
ETFs (all figures in millions of dollars):
              10/26    10/19   10/12     10/5  9/28/2016
 Equity      -1,837  -14,040  -4,094  -11,836      4,257
 -Domestic   -1,422  -14,171  -4,523   -8,861      7,899
 -World        -415      131     429   -2,975     -3,643
 Hybrid          79   -1,240  -1,768   -1,539       -506
 Bond         3,939    6,334   1,787    9,050      7,781
 -Taxable     3,290    6,294   1,487    8,117      6,663
 -Municipal     649       40     300      933      1,118
 Commodity     -831      404     228     -105        325
 Total        1,350   -8,541  -3,847   -4,429     11,856
 
 (Reporting by Trevor Hunnicutt Editing by W Simon)
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