US bond funds see biggest weekly outflow in four weeks

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U.S. dollar banknotes are shown in this illustration taken February 14, 2022. REUTERS/Dado Ruvic/Illustration

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Sep 23 (Reuters) – U.S. bond funds saw huge outflows in the week to Sept. 21 as caution about the pace and duration of U.S. interest rate hikes crept in ahead of the policy decision of the Federal Reserve.

According to data from Refinitiv Lipper, U.S. bond funds saw outflows worth $7.33 billion in their biggest weekly net selloff since Aug. 24.

Fund flows: US stocks, bonds and money market funds

The Federal Reserve raised its benchmark rate by 75 basis points on Wednesday, the third straight hike, and officials expect rates to hit 4.4% this year, 100 basis points higher than the Fed had forecast. three months ago. Read more

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The benchmark 10-year Treasury yield hit a 12-year high of 3.829% on Friday and is set for an eighth weekly increase as investors position themselves for more aggressive increases in U.S. interest rates ahead. .

U.S. short/intermediate investment-grade, high-yield, and general domestic taxable fixed-income funds all faced outflows, worth $3.59 billion, $1.81 billion, and $692 billion, respectively. millions of dollars.

However, government bond funds received $3.02 billion in a fourth consecutive week of inflows.

Fund flows: US bond funds

Meanwhile, US equity funds secured $3.99 billion in net purchases after facing outflows for four straight weeks.

Value funds, which invest in companies with cheaper valuations and stable growth, gained $731 million, while growth funds attracted $321 million in their first weekly inflow since Aug. 10.

“Value funds are generally less interest rate sensitive than growth funds, which has resulted in lower day-to-day volatility and better performance as rates have risen over the course of 2022,” said Michael Crook, Chief Investment Officer at Mill Creek Capital Advisors. .

“We expect value stocks to continue to outperform growth stocks through the end of the Fed’s hike cycle, which may well continue well into 2023 and possibly 2024.”

Fund flows: US growth and value funds

Among sector funds, technology and utilities got $401 million and $272 million, respectively, but financials saw outflows of $1.81 billion.

Fund flow: U.S. equity sector funds

Meanwhile, investors bought safer money market funds for $27.6 billion, marking their biggest weekly net purchase since May 25.

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Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru;

Our standards: The Thomson Reuters Trust Principles.

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