NEW YORK (Reuters) – Investors in U.S.-based mutual funds poured $5.5 billion into bond funds in the week ended May 7, marking the biggest inflows in a year on continued outperformance in the sector, data from the Investment Company Institute (ICI) showed on Wednesday.
Investors committed the most new cash to bond funds since the week ended May 8, 2013, which was shortly before a bond market selloff accelerated on fears of a pullback in the Federal Reserve’s bond-buying, according to data from ICI, a U.S. mutual fund trade organization.
The inflows also marked the 13th straight week of new demand
for the funds after last year’s selloff spurred record annual outflows.
Stock funds attracted $755 million in inflows over the week.
Funds that hold tax-free municipal bonds attracted $1.1 billion over the week, their biggest inflows since January 2013. Taxable bond funds attracted $4.4 billion in new cash, their biggest inflows in eight weeks.
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“With bonds having reversed their declines, with stocks getting to areas where people start getting nervous, there is a very natural but usually wrongheaded instinct to swap back into bonds,” said Michael Jones, chief investment officer of RiverFront Investment Group in Richmond, Virginia, with $4.5 billion in assets.
The inflows into stock funds reversed outflows of $3.9 billion in the prior week, which were the biggest in a year. Funds that specialize in U.S. stocks posted about $2 billion in outflows in the latest week, while funds that mainly hold non-U.S. stocks attracted $2.7 billion in new cash.
Hybrid funds, which can invest in both stocks and fixed-income securities, posted $500 million in outflows, marking their first outflows since December of last year.
Bond prices have recovered this year. The benchmark Barclays U.S. Aggregate bond index has risen 3.1 percent this year through Tuesday after declining more than 2 percent last year. The gain in the index has also surpassed the S&P; 500 stock index’s 2.7 percent return over the same period.
Yields on 30-year Treasury bonds fell to 3.39 percent on May 1, marking their lowest level since mid-June 2013, ahead of U.S. nonfarm payrolls data for April. Yields on benchmark 10-year U.S. Treasury notes fell 6 basis points to 2.59 percent over the weekly period. Bond yields move inversely to their prices.
The S&P; 500, meanwhile, fell 0.3 percent for the week on geopolitical tensions surrounding Ukraine and after enthusiasm over strong U.S. jobs growth was undercut by flat wages and a decline in the number of people looking for work.
(Reporting by Sam Forgione; Editing by Jeffrey Benkoe)