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UPDATE 1-U.S. bond funds attract cash, shaking off inflation fears
January 5, 2017 / 11:40 PM / a year ago

UPDATE 1-U.S. bond funds attract cash, shaking off inflation fears

(Recasts with bond fund inflow; adds details on mutual funds
and ETFs, analyst quote, table, byline)
    By Trevor Hunnicutt
    NEW YORK, Jan 5 (Reuters) - U.S.-based taxable bond funds
netted cash for the first time in four weeks, Lipper data
released on Thursday showed, a sign that savers may be less wary
than the Federal Reserve of inflation under the incoming Trump
administration.
    The funds attracted $1.2 billion in the week through Jan. 4,
the research service said, even as minutes from the Fed's
December meeting released on Wednesday showed concerns that
quicker economic growth under President-elect Donald Trump could
require faster-than-expected interest rate hikes to ward off
inflation. 
    The central bank's policy-setting committee unanimously
raised rates last month by a quarter of a point.
    Bonds sold off after the Nov. 8 U.S. presidential election
on fears that the new administration's plans to stimulate the
economy with tax cuts and infrastructure spending could also
stoke bond-harming inflation.
    Despite some withdrawals, investor demand for bond mutual
funds and exchange-traded fund demand has shown resiliency.
After $10.8 billion in withdrawals in November, taxable bond
fund outflows were just $5.7 billion in December, Lipper said.
    "They still do want yield, and I think they understand it's
not time to panic," said Tom Roseen, Thomson Reuters Lipper's
head of research services. "If it's slow and steady the rate
increases can actually offset the losses we have."
    Roseen said investors still need the yields that bonds offer
and which rise after a sell-off. Bond yields and prices move
inversely.
    Investment-grade corporate bond funds took in $2.2 billion
during the week, while municipal bond funds, which are
especially sensitive to interest rate moves, recorded $912
million in outflows, their eighth week of withdrawals.
    Emerging-market debt funds attracted $65 million after seven
straight weeks of withdrawals.
    The following is a broad breakdown of the flows for the
week, including ETFs (in $ billions):
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          2.403     0.04      5,466.035  11,611
 Domestic Equities         2.453     0.06      3,927.155  8,277
 Non-Domestic Equities     -0.050    -0.00     1,538.880  3,334
 All Taxable Bond Funds    1.234     0.05      2,290.312  5,871
 All Money Market Funds    -9.029    -0.38     2,342.611  1,025
 All Municipal Bond Funds  -0.912    -0.26     354.709    1,386
 
 (Reporting by Trevor Hunnicutt; Editing by Bernard Orr and
Richard Chang)

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