The outflows for the week ended June 18 marked the first net
withdrawals from the funds in 15 weeks, according to the report,
which also cited data from fund-tracker EPFR Global. Stock funds
attracted $12.6 billion in inflows, their biggest inflows since
Riskier high-yield bond funds posted $700 million in outflows,
marking their first withdrawals in 19 weeks, while funds that mainly
hold U.S. Treasuries posted $5.4 billion in outflows.
The Fed on Wednesday, at the close of its latest policy meeting,
expressed confidence the U.S. economic recovery was on track and
hinted at a slightly more aggressive pace of rate increases starting
next year. The central bank, however, lowered projections for the
long-run target interest rate.
The benchmark U.S. 10-year Treasury note yield fell about 3 basis
points to 2.62 percent after the policy decision, underscoring
investors' view that the Fed had maintained a dovish stance on
rates. Bond yields move inversely to prices.
Not all bond investors took that view, however.
"People have started to recognize that they have too much bond
exposure in their portfolio and too much exposure to rates," said
Michael Swell, co-head of global fixed income portfolio management
at Goldman Sachs Asset Management in New York.
He said the U.S. Treasury market has grown "complacent" with
rhetoric from the Fed signaling lower-for-longer interest rates, and
that U.S. interest rates are headed higher.
"We expect that, as we continue to see improvement in the U.S.
economy, as we see inflation start to pick up, we think that the
market will start pricing in a higher probability of Fed action," he
Addressing the outflows from high-yield bond funds, Swell said the
funds were vulnerable to rising rates. They "potentially could have
negative total returns mainly because U.S. Treasury rates are going
to go up," he said.
[to top of second column]
Floating-rate debt funds, which are protected from rising interest
rates, posted $600 million in outflows, marking their 10th straight
week of withdrawals.
U.S.-focused stock funds attracted $8.4 billion in inflows, while
funds that specialize in U.S. utilities stocks attracted a record
$1.2 billion in inflows.
The inflows into stock funds showed "growing confidence" that U.S.
stocks will head higher, said Scott Wren, senior equity strategist
at Wells Fargo Advisors in St. Louis. Investors are showing "a
little bit of fear that they don't want to miss more of the run."
Wren also said investors were reaching for dividends in funds that
hold utilities shares.
The benchmark S&P 500 has risen about 6 percent this year. The index
closed at a record high on Wednesday after the Fed decision and rose
0.7 percent over the weekly period.
(Reporting by Sam Forgione; Editing by Leslie Adler)
[© 2014 Thomson Reuters. All rights
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed.