April 25, 2018 / 8:31 PM / a month ago

U.S.-based bond funds garnered new cash for 9th straight week -ICI

    NEW YORK, April 25 (Reuters) - U.S.-based bond funds
attracted new cash in the week ended April 18, marking their
ninth consecutive week of inflows, Investment Company Institute
data showed on Wednesday, but rising interest rates could derail
the momentum. 
    Investors poured $8.49 billion into bond funds in the week
ended April 18, following inflows of $6.47 billion the previous
week and $2.94 billion in the week ended April 4, ICI said. 
    "We won’t know if the rise in the 10-year (yield to over 3
percent) is impacting fund flows this week," said Tom Roseen,
head of research services at Thomson Reuters Lipper. 
    This week, the benchmark U.S. Treasury 10-year yield
, a benchmark for global borrowing costs, crossed the
critical 3 percent threshold. Increased government borrowing,
together with inflation concerns due to rising commodity prices
and bets on further rate increases from the Federal Reserve,
have touched off the current bond market sell-off, with the
10-year yield currently trading around 3.03 percent. 
    Roseen said the insatiable appetite for yield has spurred
investors into bond funds in the face of Federal Reserve
tightening. Year to date, taxable bonds have attracted $68.2
billion, while equity funds have taken in $67.3 billion,
according to Lipper data.
    TrimTabs Investment Research also provided staggering
figures: In the first quarter, bond mutual funds and
Exchange-Traded Funds took in $74.1 billion, nearly four times
the inflow of $20.6 billion "into key savings vehicles, even
though bonds delivered negative returns and yields on savings
vehicles continued to increase," said David Santschi, director
of liquidity research at TrimTabs.  
    "From a contrarian perspective, fund flows suggest borrowing
costs are going to rise much more over the longer term than the
conventional wisdom expects," Santschi said.
    Investors have also shown interest in commodity funds, which
tend to do well during late-cycle recoveries. Those funds had
estimated inflows of $167 million for the week, compared with 
estimated inflows of $1.12 billion in the previous week,
according to ICI data.
    Equity funds had estimated outflows of $291 million for the
week, compared with estimated inflows of $5.21 billion in the
previous week. Domestic equity funds had estimated outflows of
$2.42 billion, and world equity funds had estimated inflows of
$2.13 billion, according to ICI.
    Hybrid funds, which can invest in stocks and fixed-income
securities, had estimated outflows of $1.09 billion for the
week, compared with estimated outflows of $1.10 billion in the
previous week, ICI said.
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in million of dollars):
                  4/18     4/11     4/4    3/28      3/21
 Equity           -291    5,213  -4,499  -11,674  -13,766
    Domestic    -2,416    3,776  -6,016  -12,377  -17,107
    World        2,125    1,437   1,517      703    3,341
 Hybrid         -1,089   -1,099    -930   -1,314      151
 Bond            8,492    6,470   2,943      263    5,315
    Taxable      9,321    7,166   3,053      137    4,546
    Municipal     -830     -696    -110      126      769
 Commodity         167    1,120     547     -332      938
 Total           7,279   11,705  -1,939  -13,057   -7,363
 
 (Reporting By Jennifer Ablan; Editing by Dan Grebler)
  
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