April 20, 2012 / 8:55 PM / 7 years ago

Global concerns drive investors into bonds - EPFR

NEW YORK (Reuters) - Fund investors favoured bonds over equities in the latest week as Spain’s borrowing costs rose and rekindled concerns over the euro zone, data from EPFR Global showed on Friday.

Global bond funds absorbed a net $4.67 billion (2.89 billion pounds) in inflows while global equity funds attracted a meagre $52 million in the week ended April 18, EPFR Global’s Director of Research Cameron Brandt said.

U.S. bond funds alone gained $4.05 billion in inflows, while U.S. equity fund flows had minimal outflows, Brandt said. High-yield “junk” bond funds recovered from last-week’s setback of $1.41 billion in redemptions with $649 million in new money.

“Despite the relative unattractiveness of bonds in general as an asset class, investors continue to favour them in the face of global uncertainty,” said Daniel Greenhaus, chief global strategist at financial services firm BTIG LLC.

The S&P 500 .SPX rose 1.2 percent over the reporting period. Markets were choppy in response to uncertainty over rising yields on Spain's government debt and lower-than-expected growth in China, which were offset by strong U.S. corporate earnings and a positive Spanish debt auction later in the week.

Emerging market bond funds recovered from last week’s outflows of $99 million with inflows of $675 million.

These funds continue to appeal to investors for their high yields, diversification, and ability to access the currency market, said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management.

Emerging markets equity funds had $716 million in outflows, continuing the previous week’s outflows of $859 million. They are the first back-to-back weeks of outflows in the category since December, EPFR Global’s Brandt said.

European equity funds had $1.33 billion in redemptions, while European bond funds had $191 million in redemptions.

“Clearly, the last two weeks have seen a re-emergence of European tensions in Italy, France, and obviously Spain, so it’s not surprising at all to see investors taking a break,” said Greenhaus.

Total money-market funds had inflows of $6.5 billion, a recovery from last week’s redemptions of $1.7 billion.

ASIA, SECTOR-SPECIFIC FUNDS

Asia ex-Japan equity funds had redemptions of $470 million, which EPFR Global’s Brandt attributed to concerns over a slowdown in China’s economy.

Among sector-specific funds, energy funds gained $712 million and commodities funds gained $472 million, both reversing outflows from the previous week.

Commodities sector funds are the inflow leaders year-to-date, EPFR Global’s Brandt said.

Editing by Bernard Orr

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