By Trevor Hunnicutt NEW YORK, Nov 23 Investors pulled $9.7 billion from U.S.-based bond funds during the latest week in the stiffest blow of the year for those funds, Investment Company Institute data showed on Wednesday. The withdrawals, during the weekly period ending Nov. 16, come during a bond rout sparked by Donald Trump's unexpected Nov. 8 win in the U.S. presidential election. Markets are voting that Trump's victory could stoke inflation and economic growth, given the president-elect's plans to boost infrastructure spending and cut taxes. But inflation can also erode bond prices and force interest rates higher. "Bonds are going to be risky, and people are going to lose money for sure," said Brad Thompson, Chief Investment Officer for Stadion Money Management LLC. Municipal bond fund outflows were particularly severe, posting $4.7 billion in withdrawals during the largest weekly bloodletting for those products since June 2013, according to ICI, a trade group for funds. Commodity funds, which include those invested in gold, posted $1.9 billion in their largest net withdrawals since April 2013, ICI said. In both cases, those withdrawals reflect two of several major trend reversals in mutual funds and exchange-traded funds (ETFs) since the U.S. elections. Both gold and municipal bonds are rate sensitive and had been popular this year before the election. Municipal bonds brought money in for a year straight, a trend that ICI said ended in November. Investors also poured the most money ever into U.S.-based stock ETFs during the latest week, earlier Lipper data showed, after a year during which they mostly sold equities for bonds. Nonetheless, withdrawals from international stock funds are accelerating, growing to $1.7 billion from an average $1 billion over the prior three weeks, ICI data showed. The weekly period also included the largest flows ever into financial and healthcare sector funds and record withdrawals from rate-sensitive emerging-market debt funds, according to the earlier Lipper data. Higher Treasury rates boost the cost of financing and help bank earnings, while Trump has promised to repeal the Obama administration's landmark healthcare law, the Affordable Care Act. Thompson, whose company invests using ETFs, said investors should exercise caution before drawing firm conclusions about the long-term direction of stock and bond markets from current trends. "Interest rates rising would be negative for stocks," he said. "Short-term, we're still bullish. But, for the long term, the jury's still out." The following table shows estimated ICI flows, including ETFs (all figures in millions of dollars): 11/16 11/9 11/2 10/26 10/19/16 Equity 21,468 -7,550 -8,297 -1,690 -14,039 -Domestic 23,161 -6,320 -6,824 -1,304 -14,171 -World -1,693 -1,230 -1,473 -386 131 Hybrid -1,757 -3,301 -1,874 79 -1,240 Bond -9,715 2,757 -4,597 3,938 6,334 -Taxable -5,031 2,867 -4,591 3,288 6,294 -Municipal -4,684 -110 -6 650 40 Commodity -1,860 637 313 -831 404 Total 8,136 -7,457 -14,455 1,496 -8,541 (Reporting by Trevor Hunnicutt; Editing by Alan Crosby)
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