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U.S. fund investors buy into bonds every week of 2017 -ICI
May 31, 2017 / 5:19 PM / 6 months ago

U.S. fund investors buy into bonds every week of 2017 -ICI

    By Trevor Hunnicutt
    NEW YORK, May 31 (Reuters) - Fund investors binged on bonds
during the latest week, sending another $8.1 billion to
U.S.-based debt funds that have not recorded a week of
withdrawals this year, Investment Company Institute data showed
on Wednesday.
    Taxable bond mutual funds and exchange-traded funds in the
United States attracted $7.4 billion, while municipal bond funds
pulled in $665 million, the trade group said.
    The rotation to bonds comes as investors have shown caution
around the handsomely priced U.S. stock market.
    Investors pulled cash from domestic equity funds for the
fourth straight week, withdrawing $5.5 billion, according to
    But some investors say now is not the time to be wary.
    "We're fully invested, and we think equity investors should
be fully invested," said Chuck Self, chief investment officer at
iSectors LLC in Appleton, Wisconsin.
    He said investors in bonds risk being on the wrong side of
an overaggressive move by the U.S. Federal Reserve to raise
rates multiple times this year while trimming its bond reserves.
Plus, the yields on bonds are puny.
    "You want to pick up yield here," said Self. "That's the
surest source of return for the balance of the year."
    Fed Governor Lael Brainard on Tuesday said she thinks a rate
hike is "likely" coming soon and that she backs shrinking the
Fed's balance sheet "before too long." Both moves
could send ripples through debt markets.
    U.S. fund investors are finding refuge not just in bonds,
but also in international stocks. Equity funds focused outside
the United States attracted $4.7 billion in their 25th straight
week pulling cash, ICI said.
    The following table shows estimated ICI flows for mutual
funds and exchange-traded funds (all figures in millions of
               5/24    5/17    5/10     5/3  4/26/2017
 Equity        -832   4,357   7,421   3,545     11,602
 -Domestic   -5,491  -5,604    -983  -4,254      6,758
 -World       4,659   9,961   8,404   7,799      4,844
 Hybrid        -212    -315     122  -1,386        566
 Bond         8,064  10,381   6,358   7,167      8,614
 -Taxable     7,399   9,791   5,721   6,933      7,960
 -Municipal     665     591     637     234        653
 Commodity     -152    -150     288     -14         -7
 Total        6,869  14,273  14,188   9,312     20,775
 (Reporting by Trevor Hunnicutt; Editing by Jonathan Oatis)

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