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U.S. taxable-bond funds reel in cash for 17th straight week -ICI
April 5, 2017 / 10:09 PM / 8 months ago

U.S. taxable-bond funds reel in cash for 17th straight week -ICI

    By Trevor Hunnicutt
    NEW YORK, April 5 (Reuters) - Investors amped up their bets
on the fixed-income market during the latest week, adding cash
to U.S.-based taxable-bond funds for the 17th straight week,
Investment Company Institute data showed on Wednesday.
    The move into U.S.-based bond funds, which has lasted more
than a year, comes despite a risk of rising U.S. interest rates
and as the Federal Reserve incubates a plan to cut its cache of
bond holdings this year.
    Fixed-income funds attracted $7.6 billion during the seven
days through March 29, the trade group said, including $7
billion in taxable-bond funds and the remainder in municipal
    Minutes from the latest meeting of the Fed's policymaking
committee released on Wednesday showed its members think the
U.S. central bank should take steps to begin trimming its $4.5
trillion balance sheet this year as long as the U.S. economy
holds up.
    Bond funds have nonetheless remained immensely popular.
    They took in $261 billion in the United States over the 14
months through February, earlier ICI data showed. Equity funds
posted nearly $19 billion in withdrawals over that period.
    By contrast, bond markets reacted violently in 2013 to the
possibility that the Fed might slow down its bond buying. Bond
mutual funds posted $71 billion in withdrawals during the "taper
tantrum" that year.
    In March, U.S. ETF investors sopped up investment-grade
bonds, emerging markets sovereign debt and Treasuries, according
to data service FactSet Research Systems Inc, while
mortgage-backed securities also attracted cash.
    Those moves could be a bet on stable rates, said Rusty
Vanneman, chief investment officer at CLS Investments LLC, but
he said the more obvious reason is investors are "just reaching
for more yield."
    That behavior did not extend to stocks, which attracted just
$1.7 billion during the week, ICI said, a reversal from
withdrawals during the prior week.
    Investors added $1.3 billion into funds focused on
international shares, their 17th straight week adding cash,
while $339 million went to equity funds focused on domestic
    The following table shows estimated ICI flows, including
mutual funds and exchange-traded funds (all figures in millions
of dollars):
               3/29    3/22    3/15     3/8  3/1/2017
 Equity       1,659  -1,752  10,992   9,112     9,116
 -Domestic      339  -6,849   9,014   4,284     5,766
 -World       1,320   5,097   1,978   4,828     3,350
 Hybrid      -1,066    -778    -242    -376      -912
 Bond         7,626  13,190   2,834   6,921     9,707
 -Taxable     6,985  12,511   3,037   6,868     9,432
 -Municipal     641     679    -203      53       274
 Commodity      100    -151     237    -663       192
 Total        8,319  10,508  13,821  14,994    18,103
 (Reporting by Trevor Hunnicutt; Editing by James Dalgleish)

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