U.S.-based Bond Funds Attract $4 Bln as Investors Warm to Riskier Debt -ICI

Wednesday, 09 March 2016 01:10 PM

By Trevor Hunnicutt NEW YORK, March 9 (Reuters) - U.S.-based bond mutual funds attracted $4.1 billion in the latest week, reversing outflows from the prior week as investors warmed to corporate debt, according to data released Wednesday by the Investment Company Institute (ICI). Investment-grade bond funds, which posted outflows during the prior week, took in $124 million during the week that ended March 2, according to ICI. High-yield bond funds added a second straight week of new money, the data showed, as investors pumped $3.6 billion into the funds, more than double the prior week. "High-yield and risk assets are moving in lock step with oil prices," said Niklas Nordenfelt, senior portfolio manager at Wells Fargo Asset Management, which has seen inflows in its high-yield products. "High-yield is also benefiting from the fact it has sold off and started showing pretty attractive yields." During the prior week, junk-bond funds in the United States broke a 15-week streak of outflows that swallowed $28.8 billion of the funds' cash and precipitated the December collapse of Third Avenue's Focused Credit Fund. "Investors embraced risk taking through bond funds last week," said Todd Rosenbluth, who directs mutual-fund research at S&P Global Market Intelligence. "This is more than six times as much that went into government funds." Government bond funds, which have benefited from a flight to safety, took in just $571 million this week, down from an average $1 billion per week over the prior two weeks. But the government funds nonetheless added a 12th week to their streak of inflows. Municipal-bond funds added a 22nd consecutive week to their inflows, taking in $934 million during the week, ICI said. Results for stock funds were mixed. Funds focused on domestic shares posted $2.2 billion in outflows during the week, while international stock funds took in $2.2 billion of new cash, according to ICI, a mutual fund trade organization. Some stock funds saw outflows "even as the market moved higher," according to Rosenbluth. The following table shows estimated ICI flows for the past five weeks (all figures in millions of dollars): 3/2 2/24 2/17 2/10 2/3/2016 Total equity 45 4,441 -1,237 -1,373 8,057 Domestic -2,189 2,090 -2,271 -3,625 2,313 World 2,234 2,350 1,034 2,252 5,744 Hybrid 987 1,601 -3,562 -1,044 1,706 Total bond 4,072 -99 963 690 -4,289 Taxable 3,138 -1,120 107 -729 -5,490 Municipal 934 1,020 857 1,419 1,200 Total 5,105 5,942 -3,835 -1,727 5,473 (Reporting by Trevor Hunnicutt; Editing by Nick Zieminski)

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Wednesday, 09 March 2016 01:10 PM
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