U.S. high-grade bond fund
outflows fastest since March
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[October 14, 2016]
By Trevor Hunnicutt
NEW
YORK (Reuters) - Demand for U.S.-based bond funds showed signs of waning
in the latest week, with investors pulling cash from investment-grade
corporate debt funds at the fastest rate since March, Lipper data showed
on Thursday.
Investors, who have feasted on high-quality corporate debt this year,
have become more wary of a potential interest rate hike by the Federal
Reserve before year-end that could cut bond values.
Corporate bond prices have leapt this year, with the widely traded
iShares iBoxx $ Investment Grade Corporate Bond ETF delivering more than
9 percent returns.
While recent withdrawals have been moderate compared to the strong
inflows earlier this year, the data showed high-grade bond funds
returned $666 million in cash to investors during the seven days through
Oct. 12, the fastest rate of outflows in seven months.
So far this year, the funds have taken in $90 billion.
"Investment grade took it on the chin," said Tom Roseen, Thomson Reuters
Lipper's head of research services. "This is tied to the Fed. People are
saying, 'We think they're going to pull the trigger in December.'"
Minutes from the Fed's most recent meeting in September showed several
policymakers judged a rate hike would be warranted "relatively soon."
Overall, U.S.-based taxable bond funds posted $2.1 billion in
withdrawals during the week, Lipper said.
High-yield junk bond funds had $72 million in withdrawals, and investors
pulled $385 million from Treasury funds.
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Withdrawals were concentrated in taxable-bond mutual funds, which had $3
billion in outflows, while Lipper said their exchange-traded fund
counterparts added $898 million.
Investors were willing to take some risk outside the United States
during the week.
Non-U.S. stock funds attracted $561 million and their first week of
inflows since late August, Lipper said, even as funds focused on
domestic shares posted $4 billion in outflows.
Emerging market stock funds took in $764 million, and Japanese equity
funds added $106 million in their first week of inflows since July.
Chinese stock funds took in $39 million in their ninth consecutive week
of inflows, the data showed.
Lipper also said money-market funds posted $10.6 billion in withdrawals
during the week, their second straight week of outflows. This came ahead
of reforms, taking effect on Friday, that would force some funds to let
their share prices float with the market.
(Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and Richard
Chang)
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