U.S. bond fund investors stirred, not shaken

By Trevor Hunnicutt

NEW YORK (Reuters) – U.S. fund investors pumped millions into bond funds for a 50th straight week, the Investment Company Institute (ICI) said on Wednesday, showing that caution in recent weeks may not portend a flight from debt generally.

Taxable-bond mutual funds and exchange-traded funds (ETFs) took in $839 million during the turbulent week ended Nov. 15, the lowest in nearly a year, as high-yield debt came under pressure, according to the trade group.

But the funds still have not posted a week of outflows in nearly a year that has seen them pull in nearly $270 billion, according to Thomson Reuters’ Lipper research unit.

This year, as markets have been transfixed by stocks and other risk assets scaling record peaks, bonds have been the clear winner among U.S. funds, taking in more than $2 for every $1 gathered by their equity counterparts, according to data from Lipper.

“There’s not a lot of value for the amount of risk that you’re taking in the high-yield market,” said Tracie McMillion, head of global asset allocation at Wells Fargo (NYSE:) & Co’s Investment Institute, referring to higher-risk bonds issued by corporations and local municipalities.

“We don’t think this is the end of the bull market. We just think we’re later in the cycle so it’s a time to start getting a little more cautious.”

U.S. fund investors walloped high-yield funds with their fourth-largest weekly withdrawals on record during the week ended Nov. 15, according to Lipper, as investor sentiment deteriorated following setbacks to several corporate mergers and in U.S. tax reform efforts.

The funds have brought some of that money back in the days since.

Overall, bond funds took in $1.5 billion during the week, aided by a 19th straight week of flows into municipal funds, ICI said. Stock funds posted $54 million in outflows, with $4.2 billion in domestic stock outflows almost offset by a 50th consecutive week of inflows for funds focused abroad.

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