August 17, 2012 / 10:00 PM / 6 years ago

Investors take profits on dim Fed outlook : EPFR

NEW YORK (Reuters) - It looks like the summer doldrums may have hit world markets as investors put less money into bond funds than they have been doing and fears over problems in Europe ebbed some, according to data from EPFR Global.

Bond funds worldwide had inflows of $4.03 billion during the week ended August 15, down considerably from the $6.7 billion those funds took in during the previous week, the fund-tracking firm said on Friday.

Specifically, U.S. bond funds took in $2.73 billion, or about half the amount of new money those same funds took in during the prior week.

Market analysts attributed the declining interest in bonds to the fact investors may be less uneasy about the euro zone financial crisis. Others said it no longer appears certain that the U.S. Federal Reserve will embark on another round of quantitative easing.

“As fears stemming from Europe dissipate, investors are going to take profit in fixed income,” said Quincy Krosby, market strategist at Prudential Financial.

Krosby added that stronger-than-expected U.S. retail sales in July may make it less likely the Fed will take further steps to stimulate the economy.

The yield on the 10-year U.S. Treasury, which not too long ago sank to a low of about 1.4 percent, is now at 1.81 percent. Yields on the 10-year are rising as investors are finding more comfort in moving out of so-called safe-haven bonds.

Meanwhile, the benchmark S&P 500.SPX eked out a 0.24 percent gain over the period, while the MSCI world equity index.MIWD00000PUS rose 0.1 percent.

The move out of safe-haven Treasuries does not mean more money flowing into stock funds. EPFR said equity funds worldwide registered outflows of $5.62 billion, even more than the $1.3 billion that fled from those funds the previous week.

U.S. equity funds had outflows of $6.3 billion, the most since the week ended July 25, said EPFR.


European bond funds had inflows of nearly $176 million, up from inflows of $139 million the previous week. European stock funds had outflows of nearly $1.24 billion, dwarfing outflows of $89 million the previous week.

“Investors see the bond yields as pretty high with perhaps less risk than the equities,” said Rick Meckler, president of investment firm LibertyView Capital Management.

Among sector-specific equity funds, commodities funds had outflows of $53.13 million, reversing inflows of $736 million the previous week.

High-yield “junk” bond funds raked in $990.2 million, down from $1.67 billion the previous week, as decreased appetite for bonds overall weighed on gains.

Reporting by Sam Forgione; Editing by Matthew Goldstein and Dan Grebler

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