Investors in U.S.-based mutual funds committed a net $831 million to bond funds in the week ended Sept. 24 on continued appetite for tax-free municipal debt, data from the Investment Company Institute showed on Wednesday.
The inflows came after investors pulled $755 million from bond funds the prior week, which were the first outflows in six weeks, according to data from ICI, a U.S. mutual fund trade organization.
Stock funds attracted a meager $70 million, still marking the third straight week of inflows. Most of the new money flowing into bond funds went toward those that hold municipal bonds, which attracted $810 million. That marked their 11th straight week of new demand.
"This is just a yield-chasing play," said David Keeble, global head of fixed income strategy at Credit Agricole in New York.
He said investors continued to favor tax-free municipal bond yields over low yields on taxable U.S. Treasurys. Keeble also said relatively stable U.S. home prices were propping up revenue in U.S. municipalities, making municipal bonds a more attractive investment.
Funds that specialize in U.S. stocks posted $1.5 billion in outflows, their fifth straight week of withdrawals, while funds that focus on international stocks continued their streak with over $1.5 billion in inflows.
The benchmark S&P 500 stock index fell a slight 0.2 percent during the reporting period, partly on concerns of an economic slowdown in China and weak European economic data. The Barclays U.S. Aggregate Bond Index rose just 0.2 percent. Analysts have said that investors have favored cheaper international stocks in recent weeks over U.S. shares, which have hit multiple record highs this year.
Hybrid funds, which can invest in stocks and fixed income securities, attracted $856 million, up from the prior week's modest inflows of $179 million and marking the funds' seventh straight week of new demand.
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