(Reuters) – U.S. bond funds posted big outflows in the week to March 16 as another strong reading on U.S. inflation last week locked in expectations that the Federal Reserve will have to act rapidly on tightening policy to control surging prices.
U.S. investors exited bond funds for a 10th consecutive week, selling $7.24 billion worth, compared with net selling of $7.8 billion in the previous week, Refinitiv Lipper data showed.
Graphic: Fund flows: U.S. equities, bonds and money market funds https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwargapo/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg
The Fed announced a quarter of a percentage point increase to near-zero U.S. interest rates on Wednesday, and signalled it would hike rates more aggressively than expected to tame soaring inflation, following a firm inflation reading last week.
U.S. taxable bond funds lost $5.18 billion in a second consecutive week of net selling, while municipal bond funds saw a fifth weekly outflow, worth $2.04 billion.
Investors sold U.S. high yield funds to the turn of $1.86 billion and pulled $3.8 billion out of U.S. short/intermediate investment-grade funds, marking a 10th weekly outflow in a row.
Graphic:Fund flows: U.S. bond funds https://fingfx.thomsonreuters.com/gfx/mkt/mypmnxdyevr/Fund%20flows%20US%20bond%20funds.jpg
However, demand for inflation-protected funds nearly doubled over the previous week, as they gathered $0.81 billion in net purchases.
Meanwhile, investors turned net sellers in U.S. equity funds, offloading funds worth $2.81 billion, compared with purchases of $4.57 billion in the preceding week.
U.S. value funds, however, drew purchases of $1.41 billion after two straight weeks of outflows, but growth funds saw a sixth weekly outflow worth $2.61 billion.
Graphic: Fund flows: US growth and value funds: https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkoxmlpx/Fund%20flows%20US%20growth%20and%20value%20funds.jpg
Among sector funds, weekly selling in consumer discretionary funds hit a six-week high of $1.16 billion, while tech and industrials, each saw outflows of about $0.85 billion. Mining funds, however, attracted $1.07 billion worth of purchases.
Graphic: Fund flows: US equity sector funds: https://fingfx.thomsonreuters.com/gfx/mkt/klpykbxllpg/Fund%20flows%20US%20equity%20sector%20funds.jpg
U.S. money market funds saw a second weekly outflow worth $18.3 billion, although a 32% drop in selling compared with outflows a week ago.
(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Kim Coghill)
