March 7, 2019 / 10:56 PM / 3 months ago

UPDATE 1-U.S.-based equity funds post $6.97 bln of cash withdrawals in latest week

 (Adds quotes from senior research analyst at Lipper)
    By Jennifer Ablan
    March 7 (Reuters) - Investors' appetite for risk-taking took
a breather in the latest week, as U.S.-based equity funds posted
$6.97 billion of cash withdrawals in the week ended Wednesday,
according to data from Refinitiv's Lipper research service.
    Additionally, U.S.-based high-yield junk bond funds - which
move in sympathy with stocks - posted $1.9 billion of outflows
during the same period, following five straight weeks of
inflows, Lipper said.
    Investors moved money into higher-quality asset classes.
    U.S.-based money market funds attracted roughly $28 billion
in the week ended Wednesday, their second consecutive week of
inflows, according to Lipper. 
    U.S.-based investment-grade corporate bond funds attracted
$2 billion in the week ended Wednesday, their sixth consecutive
week of inflows, Lipper added. 
    Pat Keon, senior research analyst at Lipper, said taxable
bond funds have bounced back in the first quarter with net
inflows of $47 billion - after having their worst quarterly net
outflows in their history in the fourth quarter of 2018,
suffering net withdrawals of $135.4 billion. 
    "Investment-grade corporate bond funds have been the biggest
contributor to this turnaround with net inflows of $20 billion,"
Keon said. 
    "The change in investor sentiment was initiated and driven
by the Federal Reserve softening its stance on both interest
rate increases and the reduction of its balance sheet."
    In early January, Federal Reserve Chairman Jerome Powell
stated the Fed would be patient on its interest-rate policy and
would need to see a reason to raise rates before doing so. 
    "This contradicted the Fed’s forecast in December, which
called for two rate hikes in 2019," Keon said. "The Fed also
announced it would stop selling the bonds it has on its balance
sheet relatively soon." 
    Keon noted that in the December meeting Powell stated the
balance sheet reduction program was on auto-pilot and the Fed
was not reviewing it for any changes. "These bonds were acquired
by the Fed as part of the quantitative easing program, following
the global financial crisis in 2008," Keon said.
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
 Sector              Flow Chg       % Assets  Assets      Count
                     ($Bil)                   ($Bil)      
 All Equity Funds    -6.966         -0.10     7,164.363   12,105
 Domestic Equities   -4.665         -0.09     5,083.385   8,584
 Non-Domestic        -2.301         -0.11     2,080.978   3,521
 All Taxable Bond    -1.488         -0.05     2,814.164   5,971
 All Money Market    27.957         0.95      2,982.093   1,011
 All Municipal Bond  0.798          0.18      444.395     1,411
 (Reporting by Jennifer Ablan;
Editing by Lisa Shumaker and Phil Berlowitz)
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