(Adds details on mutual funds and ETFs, analyst quote, table,
By Trevor Hunnicutt
NEW YORK, March 16 Investors recoiled from debt
issued by low-rated companies during the latest week, pulling
the most cash since August 2014 from U.S.-based, high-yield bond
funds, Lipper data showed on Thursday.
The junk bond funds recorded $5.7 billion in withdrawals,
Lipper said, while taxable-bond funds overall posted their first
net cash outflows of the year, the research service's data
showed for the seven days through March 15.
The withdrawals from high-yield bonds come after a streak of
overwhelming popularity for bond funds despite a continuing
rally in U.S. stocks. Stock funds posted $72 billion in
withdrawals last year, while bonds attracted $190 billion,
according to ICI, a trade group.
Mohamed El-Erian, chief economic adviser at Allianz SE
, said investors might be looking to de-risk from the
junk bond sector, given the backdrop of interest-rate increases
"The low-credit quality names that have been overly boosted
by the general tide of higher risk-taking and the stretch for
yield," should now be sold off or avoided, El-Erian told
On Wednesday, the Federal Reserve raised interest rates for
the second time in three months, a move spurred by steady
economic growth, strong job gains and confidence that inflation
is rising to the central bank's target.
However, the Fed's policy-setting committee did not flag any
plan to accelerate the pace of monetary tightening - which many
investors had expected and resulted in short-term relief rally
"People were really fearful of the FOMC," said Tom Roseen,
head of research services for Thomson Reuters Lipper, referring
to the Fed's policymaking Federal Open Market Committee.
During the latest week, a number of fixed-income fund
categories saw inflows, including investment-grade credit,
Treasuries and emerging market bonds.
Roseen said high-yield corporate bonds offer a slimmer
premium, or spread, over the yield of low-risk bonds after a
streak of strong performance starting last year.
"Spreads are going to have to widen a bit more for corporate
high-yield to be attractive," he said.
Taxable-bond mutual funds posted $3.9 billion in
withdrawals, while investors pulled $1.1 billion from their ETF
counterparts. Mutual funds are seen to represent retail
investors' moves, while ETFs reflect a range of investors,
including institutions such as hedge funds.
Stock funds attracted $890 million as inflows into products
focused domestically were offset by net withdrawals from
international equities funds. Before the latest week,
non-domestic stock funds had seen nine straight weeks of
U.S.-based funds invested in Japanese stocks posted $429
million in withdrawals, their largest outflows since July.
Healthcare and biotech sector funds posted $214 million in
outflows, their largest withdrawals since January. Real estate
sector funds posted their largest withdrawals since December,
The following is a broad breakdown of the flows for the
week, including mutual funds and exchange-traded funds:
Sector Flow Chg % Assets Assets Count
All Equity Funds 0.890 0.02 5,793.858 11,759
-Domestic Equities 2.979 0.07 4,149.020 8,401
-Non-Domestic Equities -2.089 -0.13 1,644.837 3,358
All Taxable Bond Funds -5.040 -0.21 2,357.364 5,931
All Money Market Funds -10.719 -0.46 2,307.900 1,030
All Municipal Bond Funds -0.118 -0.03 370.314 1,408
(Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan,