May 26, 2016 / 11:12 PM / a year ago

UPDATE 1-Taxable bond funds attract money during latest week -Lipper

(Recasts with inflows into safer assets; adds data on mutual
funds, ETFs, table, byline)
    By Trevor Hunnicutt
    NEW YORK, May 26 (Reuters) - U.S. fund investors deployed
money into taxable bond funds and other safer assets in the
latest week, Lipper data showed on Thursday, amplifying a
rotation from stocks into bonds which has become one of this
year's dominant themes.
    Taxable bond funds had inflows of $1.5 billion during the
week ended May 25, less robust than the $4.9 billion of inflows
in the prior week as investors favored only the safest assets
such as Treasuries.
    Bond investors had been willing to take on more risk in
recent weeks. In the prior week ended May 18, there was strong
interest in bond funds across the market - from high-yield bonds
to emerging-market debt, Treasury, municipal and
investment-grade bond funds. 
    But in the latest week, investment-grade, municipals and
Treasury funds attracted inflows, while the more speculative
emerging-market debt and high-yield categories both had
outflows, the data showed.
    Money-market funds, where investors park cash, took in $7.3
billion in the week.
    Bond markets have been in flux since the U.S. Federal
Reserve signaled it could raise interest rates as soon as June. 
 
    But U.S. bonds still offer competitive yields in a bond
universe starved for those returns. U.S. taxable bond funds have
added $53 billion this year, Lipper figures show.
    "We are seeing very large volumes of foreign buying of U.S.
corporate bonds," Hans Mikkelsen, head of high-grade credit
strategy at Bank of America Merrill Lynch, said in an
email before this week's numbers were released.
    Mikkelsen said those flows have helped investment-grade
bonds, where fundamentals are "arguably" stronger than
high-yield even excluding weaker energy firms hurt by weak oil
prices.
    U.S.-based stock funds recorded $4.8 billion in withdrawals
during the latest week, Lipper said, for a fourth straight week
of outflows.
    Despite a rally in riskier assets that started in February,
there have not been two weeks in a row of inflows for U.S.-based
stock funds since November 2015. And the markets have grown more
moody in recent weeks, further straining investors' confidence.
    European and Japanese stock funds posted a 17th straight
week of outflows during the latest week, data from the Thomson
Reuters fund research service showed.
    The weekly Lipper fund flow data is compiled from reports
issued by U.S.-domiciled mutual funds and exchange-traded funds.
    The following is a broad breakdown of the flows for the
week, including ETFs (in $ billions):
    
 Sector                    Flow Chg  Pct of    Assets     Count
                           ($ blns)  Assets    ($ blns)   
 All Equity Funds          -4.846    -0.10     5,152.615  11,991
 Domestic Equities         -1.827    -0.05     3,652.934   8,513
 Non-Domestic Equities     -3.019    -0.20     1,499.681   3,478
 All Taxable Bond Funds     1.502     0.07     2,238.399   6,089
 All Money Market Funds     7.257     0.29     2,481.190   1,137
 All Municipal Bond Funds   0.950     0.25       373.660   1,41
    

 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Leslie Adler)

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