March 10, 2017 / 12:37 AM / 5 months ago

UPDATE 1-Investors cash out of U.S.-based junk bond funds

 (Adds details on mutual funds and ETFs, analyst quote, table,
byline)
    By Trevor Hunnicutt
    NEW YORK, March 9 (Reuters) - Investors are spurning
U.S.-based high-yield junk bond funds, Lipper data showed on
Thursday, as they keep gobbling up stocks and other risky
assets.
    High-yield bond funds posted $2.1 billion in net withdrawals
during the week ended March 8, the most since November 2016, the
data showed.
    The flight from lower-grade corporate debt follows strong
performance in the asset class that suggests sharply reduced
expectations of default.
    That performance, reflected in tight spreads between the
yields investors demand on junk bonds and those on lower-risk
offerings, could be challenged ahead of next week's U.S. Federal
Reserve's policy-setting meeting after a sharp oil sell-off.
    Crude fell this week to prices not seen since a pact led by
the Organization of the Petroleum Exporting Countries (OPEC) to
cut production was agreed as record U.S. inventories fed doubts
about the effectiveness of the deal to curb a global glut.

    Energy producers are heavily represented in junk bond
indexes.
    Monetary policymakers have telegraphed that they may raise
interest rates, which could shrink bond prices and hike
borrowing costs for indebted companies.
    Neither of those possibilities are shaking the broader
market.
    Stocks, which are seen as closely linked to high-yield
performance over longer stretches, remain popular with fund
investors.
    U.S.-based stock funds attracted their sixth straight week
of net inflows, $8.5 billion, while taxable bond funds netted
$2.8 billion despite the high-yield outflows, the research
service's data showed. Energy sector stock funds pulled in $170
million.
    Precious metals commodities funds, which invest in
non-yielding gold, posted $514 million in net outflows, the most
since December.
    "There's a lot of pent-up demand and now investor
enthusiasm," said Pat Keon, senior research analyst for Thomson
Reuters Lipper.
    U.S.-based stock funds that invest outside of the country
attracted $3 billion, their largest net inflow in close to a
year, as investors pursued bargains abroad. European stock funds
took in $351 million, the largest net inflow since January 2016.
    Demand for assets that profit from rising rates helped loan
participation funds attract $1.2 billion, extending a streak of
inflows that has lasted the entire year. The funds invest in
bonds that hike their payouts as rates rise.    
    The following is a broad breakdown of the flows for the
week, including mutual funds and exchange-traded funds:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          8.529     0.15      5,694.378  11,699
 Domestic Equities         5.488     0.13      4,080.513  8,357
 Non-Domestic Equities     3.041     0.19      1,613.865  3,342
 All Taxable Bond Funds    2.821     0.12      2,352.210  5,917
 All Money Market Funds    11.795    0.47      2,533.597  1,014
 All Municipal Bond Funds  -0.073    -0.02     370.429    1,407
 
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Richard Chang)
  

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