US fund investors deployed money into taxable bond funds and other safer assets in the latest week, Lipper data showed on Thursday, amplifying a rotation from stocks into bonds which has become one of this year’s dominant themes.
Taxable bond funds had inflows of $1.5 billion during the week ended May 25, less robust than the $4.9 billion of inflows in the prior week as investors favored only the safest assets such as treasuries, Reuters reported.
Bond investors had been willing to take on more risk in recent weeks. In the prior week ended May 18, there was strong interest in bond funds across the market—from high-yield bonds to emerging-market debt, treasury, municipal and investment-grade bond funds.
But in the latest week, investment-grade, municipals and treasury funds attracted inflows, while the more speculative emerging-market debt and high-yield categories both had outflows, the data showed.
Money-market funds, where investors park cash, took in $7.3 billion in the week. Bond markets have been in flux since the US Federal Reserve signaled it could raise interest rates as soon as June.
But US bonds still offer competitive yields in a bond universe starved for those returns. US taxable bond funds have added $53 billion this year, Lipper figures show. “We are seeing very large volumes of foreign buying of US corporate bonds,” Hans Mikkelsen, head of high-grade credit strategy at Bank of America Merrill Lynch, said in an email before this week’s numbers were released.
Mikkelsen said those flows have helped investment-grade bonds, where fundamentals are “arguably” stronger than high-yield even excluding weaker energy firms hurt by weak oil prices.
US-based stock funds recorded $4.8 billion in withdrawals during the latest week, Lipper said, for a fourth straight week of outflows.
