February 21, 2018 / 5:48 PM / a year ago

U.S. bond funds post 1st week of withdrawals since 2016 -ICI

    By Trevor Hunnicutt
    NEW YORK, Feb 21 (Reuters) - U.S. fund investors tiptoed
back into stocks after pulling the most cash on record the week
prior, but they are now punishing bonds, Investment Company
Institute (ICI) data showed on Wednesday.
    Investors pulled $12.1 billion from bond mutual funds and
exchange-traded funds (ETFs) in the United States during the
most recent week, the trade group said, marking the most cash
drained out of those products since December 2015 and the first
week of net withdrawals since 2016.
    The skittishness comes after a bout of volatility shook
equity markets. That forced holders of richly priced corporate
debt to ask whether the yields of high-yield bonds are high
enough. Inflationary pressures and the prospect of rising
interest rates have also kept investors on edge.
    The bond fund withdrawals are still just a blip given the
hundreds of billions investors cashed out of a rising stock
market and funneled into bonds over the past few years. Nearly
half a trillion has rushed into U.S.-based bond funds since the
beginning of 2016, Thomson Reuters' Lipper unit estimates.
    "This is the beginning of a period of higher volatility, and
even if the direction is mostly upward for U.S. stocks, it's
going to be characterized by higher levels of volatility than we
saw in 2017," said Kristina Hooper, global market strategist at
Invesco Ltd.
    U.S. stock funds took in $1.5 billion during the week, after
their brutal $34 billion of withdrawals the week prior, the most
on record.
    Some $9.1 billion moved into funds focused on stocks outside
the United States, while domestic stock funds recorded $7.6
billion of outflows, according to ICI. U.S. stocks have
ricocheted following their quick, more-than-10 percent fall
around the beginning of February.
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in million of dollars):
               2/14     2/7      1/31    1/24    1/17/2018
 Equity        1,511    -33,978  12,468  23,395  11,874
    Domestic   -7,568   -37,003  4,533   12,911  1,720
    World      9,079    3,025    7,935   10,483  10,154
 Hybrid        -1,456   -1,393   -182    100     -238
 Bond          -12,114  7,296    8,862   15,110  9,261
    Taxable    -11,474  7,885    7,017   12,657  6,804
    Municipal  -640     -588     1,845   2,453   2,457
 Commodity     182      939      386     1,412   45
 Total         -11,876  -27,136  21,533  40,017  20,942
 (Reporting by Trevor Hunnicutt; Editing by Jonathan Oatis)
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