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Investors race back to U.S. bond funds at fastest clip in 5 months -ICI
January 18, 2017 / 5:53 PM / 10 months ago

Investors race back to U.S. bond funds at fastest clip in 5 months -ICI

By Trevor Hunnicutt
    NEW YORK, Jan 18 (Reuters) - Investors are unwinding the big
bond selloff since the U.S. election, showering U.S.-based fixed
income funds with the most new cash in five months during the
latest week, Investment Company Institute data showed on
Wednesday.
    U.S.-based bond funds harvested $9.6 billion in new cash
during the week ended Jan. 11, the most since early August,
according to the trade group.
    The November election that gave Republicans control of the
White House and Congress also ratcheted bond prices down. The
tax cuts and other stimulus measures touted by President-elect
Donald Trump stoked fears of inflation, eroding the value of
bonds.
    Yet government bond prices have risen somewhat in recent
weeks though specifics on fiscal policy remain foggy before
Trump takes office on Friday. The U.S. 10-year yield 
has fallen to 2.38 percent from 2.60 percent on Dec. 16, but
those rates are still higher than 1.78 percent on Nov. 4. Bond
prices rise as yields fall.
    "The relatively safety provided by both taxable and
municipal bond funds is appealing to investors amid market
uncertainty heading into the presidential transition," said Todd
Rosenbluth, director of ETF and mutual fund research at CFRA.
    Municipal bond funds, which have been punished in recent
weeks and are particularly sensitive to Treasury rates, netted
cash for the first time in 11 weeks. Those funds took in $1.9
billion during the week.
    Taxable bond funds added $7.8 billion, the most in 14 weeks.
    "The return to net inflows of municipal bond funds is highly
encouraging as the investment category is primarily used by
retail investors," said Rosenbluth.
    The $13.9 billion taken in by bond funds over the last three
weeks reverses the $13.3 billion that was pulled from the funds
in November, ICI data shows.
    The move into bonds did not come at the expense of stocks, a
big winner since the election.
    Funds focused specifically on international equities took in
$4.4 billion, the most since February 2016. Domestic stock funds
took in $3 billion, bringing the overall total for U.S.-based
stock funds to $7.4 billion, ICI said.
    The following table shows estimated ICI flows, including
ETFs (all figures in millions of dollars):
               1/11     1/4   12/28   12/21  12/14/2016
 Equity       7,441  -1,627  -1,335     831      19,891
 -Domestic    3,011  -2,092     660    -344      18,605
 -World       4,430     465     675   1,175       1,285
 Hybrid        -913  -1,951  -1,105  -2,151      -6,661
 Bond         9,603   2,407   1,886  -2,610        -973
 -Taxable     7,751   3,992   4,626   1,316       2,560
 -Municipal   1,853  -1,585  -2,740  -3,925      -3,533
 Commodity     -283    -500    -240    -936        -576
 Total       15,848  -1,671   1,877  -4,864     -11,681
    

 (Reporting by Trevor Hunnicutt; editing by Diane Craft)

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