By Sam Forgione
NEW YORK, Feb 19 (Reuters) - Investors in U.S.-based mutual funds committed $1.1 billion to bond funds in the latest week as some concerns of a pullback in the U.S. stock market came into play, even as stocks attracted substantial new funds, data from the Investment Company Institute showed on Wednesday.
The inflows into bond funds in the week ended Feb. 12 were the biggest in five weeks and the first net inflows in four weeks, the data from ICI, a U.S. mutual fund trade organization, showed. In the previous week, the bond funds had outflows of about $2.9 billion. Stock funds attracted about $7.3 billion in new cash, marking their biggest inflows in four weeks. Funds that specialize in U.S. stocks attracted $4.2 billion, while funds that mainly hold non-U.S. stocks attracted $3.1 billion. The week's inflows into bond funds came despite losses on benchmark U.S. Treasuries prices. The yield on the 10-year U.S. Treasury note rose 14 basis points to 2.76 percent over the weekly period. Bond yields move inversely to their prices. In her first public comments as Fed chief on Feb. 11, Janet Yellen emphasized continuity in the U.S. central bank's monetary policy, saying the Fed was on track to keep reducing its stimulus. Yellen's comments reassured investors that the U.S. economy was on a better track, which limited demand for safe-haven bonds. U.S. stocks rallied on Yellen's comments.
The benchmark Standard & Poor's 500 stock index rose 3.9 percent over the reporting period, driving the inflows into stock funds. Despite losses on benchmark bonds, bond funds attracted new cash on fears that the U.S. stock market could suffer a steeper correction from last year's record highs. The S&P 500 is down about 0.4 percent so far this year, but some investors have cautioned of a bigger drop ahead. "It wouldn't be surprising for some investors to sell some of the recent strength in equities and increase their downside protection by putting cash into bond funds," said Alan Gayle, senior investment strategist at RidgeWorth Investments. Hybrid funds, which can invest in stocks and fixed-income securities, attracted $1.9 billion in new cash, marking their biggest inflows since late October.
The following data shows estimated ICI flows for the past five weeks (all figures in millions of dollars): 1/15/2014 1/22 1/29 2/5 2/12 Total Equity 8,040 6,452 5,398 1,726 7,257 Domestic 4,242 2,493 1,881 -1,727 4,159 World 3,798 3,959 3,517 3,453 3,097 Hybrid* 1,055 1,642 1,738 1,385 1,874 Total Bond 967 -261 -938 -2,860 1,130 Taxable 727 -382 -1,448 -3,006 968 Municipal 239 121 510 146 162 Total 10,062 7,833 6,198 251 10,261 *Hybrid funds can invest in stocks and/or fixed income securities.
By Sam Forgione