US bond funds record outflows for 17th consecutive week

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(Reuters) – U.S. investors remained net sellers of bond funds in the week to May 4 as growing inflationary challenges in the economy stoked caution ahead of the Federal Reserve’s policy meeting this week.

According to data from Refinitiv Lipper, U.S. investors offloaded $5.52 billion from bond funds in a 17th straight week of net selling.

Chart: Fund Flows: US Stocks, Bonds and Money Market Funds – https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwgeggvo/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds. .jpg

The benchmark 10-year US Treasury yield hit nearly a 3.5-year high of 3% this week after reports last week showed an increase in US consumer spending in March and an increase in labor costs in the first quarter.

After an expected 50 basis point hike in the central bank’s benchmark overnight interest rate on Wednesday, Fed Chairman Jerome Powell ruled out a 75 basis point rate hike in a next meeting, although he clearly indicated the rate hikes the Fed already had in mind. “were not going to be pleasant”.

Investors sold taxable US bond funds worth $3.82 billion and municipal funds worth $1.75 billion.

US investment grade short/mid funds saw a net sale of $5.46 billion in a 17th consecutive week of outflows. Lending participation funds, however, secured inflows of $0.83 billion, the highest amount in three weeks.

Chart: Fund Flows: US Bond Funds – https://fingfx.thomsonreuters.com/gfx/mkt/byvrjnaomve/Fund%20flows%20US%20bond%20funds.jpg

Meanwhile, weekly outflows from U.S. equity funds fell to a four-week low of $3.76 billion.

U.S. value funds posted their first weekly inflow in seven weeks, worth $854 million, while growth funds saw a net sale of $3.93 billion, although it slumped acts the lowest output in four weeks.

Chart: Fund Flows: US Growth and Value Funds – https://fingfx.thomsonreuters.com/gfx/mkt/akpezyrdovr/Fund%20flows%20US%20growth%20and%20value%20funds.jpg

Among sector funds, technology and financials lost $724 million and $593 million in net sales, respectively, while utilities saw net purchases of $542 million. Chart: Fund Flows: US Equity Sector Funds – https://fingfx.thomsonreuters.com/gfx/mkt/zgvomleqkvd/Fund%20flows%20US%20equity%20sector%20funds.jpg

US money markets attracted net purchases of $2.63 billion, although there was a 94% drop in inflows from the previous week.

(Reporting by Gaurav Dogra in Bengaluru; Editing by Paul Simao)

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