Investors favor equity ETFs, junk bonds as risk appetite grows: Lipper

[March 01, 2019]   By Jennifer Ablan

(Reuters) - Investors poured money into equity exchange-traded funds and high-yield "junk" bond funds in the week ended on Wednesday, as U.S. President Donald Trump said he would extend a deadline to delay escalating tariffs on Chinese imports, citing "substantial progress" in talks between the two countries.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 27, 2019. REUTERS/Brendan McDermid

U.S.-based high-yield bond funds attracted $698 million, marking the sector's fifth straight week of inflows, according to data from Refinitiv's Lipper research service. U.S.-based equity ETFs attracted about $7.5 billion in the latest week, Lipper noted.

Investors' risk appetite grew in the wake of "some positive" news about U.S.-China trade talks earlier in the week, said Pat Keon, senior research analyst at Lipper. He also cited the U.S. Federal Reserve's statements that the central bank would be patient in hiking interest rate and that it would soon stop reducing its balance sheet.

"It was a good week overall, net inflows just shy of $16 billion with all four asset groups - money markets, taxable bond funds, muni bond funds, and equity funds - taking in net new money," Keon said.

Taxable bond funds posted $4.3 billion in inflows, the largest outside of money market funds.

"It was the taxable bond funds group's seventh straight weekly net inflow," he said. "Ultra-short obligation funds (USO) drove the overall positive net flows for the group as they took in $1.47 billion. This is the continuation of a long-term trend as USO funds have had net inflows in 50 of the last 51 weeks for a total intake of over $69 billion."

Equity ETFs, which attracted $7.5 billion, were responsible for all of the net inflows as equity mutual funds saw $5.1 billion leave, Keon noted.

"This was the second straight net outflow for equity mutual funds after six straight net inflows," he said. "The net outflows for equity mutual funds were across the board as the majority of peer groups saw money leave, both for domestic and nondomestic funds."

The two largest net inflows for individual ETFs belong to broad market U.S. equity products as SPDR S&P 500 ETF and iShares Core S&P Total U.S. Stock Market ETF took in $2 billion and $1.1 billion, respectively, Keon pointed out.

(Reporting by Jennifer Ablan; Editing by Jonathan Oatis and Richard Chang)

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