Bond funds across the globe got outflows worth $1.6 billion as investors wait for indicators from the Federal Reserve with regards to its stimulus program. This was according to the data released by Bank of America Merrill Lynch Global Research.
The outflows from bond funds came after investors gave $4.4 billion to the funds the week before. During the week investors waited for a statement from the Federal Open Market Committee about the status of its $85 billion in monthly purchases of Treasuries and agency mortgages. Investors were worried that interest rates would increase if the Fed reduce or cut its stimulus program.
The Fed’s buy purchasing initiative has been a major source of support for stock and bond markets. Fed Chairman Ben Bernanke’s testimony to Congress last May 22 that the Federal Reserve could decrease its stimulus program later this year has led to a selloff in the bond market.
Municipal bond funds had outflows for the 10th week in a row. Their outflows this week was worth $1.6 billion. Riskier high yield junk bonds had small outflows worth $57 million, which was down from the record high of $5.4 billion the previous week.
Fund that hold floating rate bank loans increased $1.6 billion in new cash. This marked their 58th week in a row of inflows. Floating-rate loans are safe from increasing interest rates due to their floating-rate benchmarks. Emerging market bond funds got $700 million in outflows. This was their 10th week of outflows in a row.
Investors placed $6.6 billion to stock funds, which indicated continued demand for the funds after inflows of $8 billion the previous week. The inflows came even if the Standard & Poor’s 500 Index dropped 0.01 percent over the week due to mixed profits reports as well as the US government’s monthly jobs report due on Friday.
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