January 23, 2019 / 8:20 PM / 8 months ago

U.S. bond funds nab most cash in nearly a year -ICI

    By Trevor Hunnicutt
    NEW YORK, Jan 23 (Reuters) - U.S. fund investors returned in
force to bonds during the latest week, putting the most cash in
debt markets in almost a year, Investment Company Institute
(ICI) data showed on Wednesday.
    Bond mutual funds and exchange-traded funds (ETFs) snagged
$9.3 billion in new cash during the week ended Jan 16, the most
since late January 2018, the trade group said.
    Federal Reserve Chairman Jerome Powell and other U.S.
monetary policy officials have made it clear in recent weeks
that they are ready to stop raising interest rates and
tightening lending conditions, a salve to investors in
speculative assets.
    "It speaks to an assumption that the Fed is going to take
its foot off the accelerator and that growth is not going to be
that bad either," said Kristina Hooper, global market strategist
at Invesco Ltd.
    A resurgence in bond buying is helping corporate credit
markets in 2019's first weeks after the year prior was clouded
by fears that companies got in over the heads borrowing to buy
other companies and to buy their own shares back. 
    Investors now demand just 3.2 percent in extra yield for a
speculative "BB" rated corporate bond coming due in five years
compared to a similar U.S. Treasury. That figure was 3.7 percent
at the end of 2018, according to a Thomson Reuters index.

    Hooper said fourth-quarter U.S. corporate earnings are
beating deflated expectations, and that development is better
than the alternative. Some 76 S&P 500 companies have
reported earnings so far, with three quarters of them turning in
profits above Wall Street's expectations.
    Yet fund investors' demand for stocks was spottier during a
week that included data about China's exports unexpectedly
falling the most in two years in December. U.S.-based equity
funds recorded $2.8 billion in withdrawals after attracting
$11.3 billion the week prior.
    The drop in China's exports pointed to further weakening of
the world's second-largest economy and faltering global demand
while Beijing and Washington negotiate a trade conflict.

    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in millions of dollars):
                 1/16     1/9  1/2/2019  12/26/2018    12/19
 Equity        -2,785  11,326   -11,296     -21,079  -10,464
    Domestic   -4,931   6,630    -6,260     -11,747   -2,499
    World       2,145   4,696    -5,036      -9,331   -7,965
 Hybrid            16      11    -5,421      -8,268   -9,547
 Bond           9,328   6,300   -14,171      -9,321  -12,533
    Taxable     7,634   4,350   -14,073     -10,234  -12,013
    Municipal   1,694   1,950       -98         913     -521
 Commodity       -213     711       478         707      390
 Total          6,345  18,348   -30,411     -37,961  -32,154
 (Reporting by Trevor Hunnicutt; editing by Diane Craft)
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