By Alison Griswold
June 13 (Reuters) - Investors in funds based in the United
States pulled a net $3.28 billion from corporate high-yield bond
funds in the week ended June 12 as concerns lingered that the
Federal Reserve would taper its stimulus program, data from
Thomson Reuters Lipper service showed on Thursday.
The latest week's large junk bond outflows followed a record
$4.63 billion in outflows from high-yield bonds in the preceding
week. All taxable bond funds, meanwhile, had net outflows of
$5.51 billion in the latest week, after seeing their largest
outflows since October 2008 in the previous week.
"I think the natural move is investors are starting to pare
back some of their bond exposure and we're really seeing that on
the riskier end, so in high-yield bonds and emerging market
debt," said Matthew Lemieux, a senior research analyst for
The 10-year Treasury note yield climbed roughly 50 basis
points during May as speculation mounted over how the Fed may
act to wind down its bond-purchase program, which has
artificially held yields down.
Junk bonds have been feeling the ripple effects of the
recent rise in Treasury yields, with the Bank of America/Merrill
Lynch High Yield Master Index losing 2.91 percent from its peak
in early May.
Because high-yield bonds sold off even more than Treasuries,
the yield premium that junk bond investors demanded over
government debt, or spread, actually widened. Junk bond spreads
have blown out by 79 basis points since early May to currently
trade above 500 basis points over Treasuries.
Emerging markets equity funds were also a big underperformer
in the latest week. They had outflows of $2.13 billion, the
largest since February 2011. Emerging market debt funds had
redemptions of $622 million, their third consecutive week of
The outflows from all emerging markets equity funds were
driven by $2.32 billion in redemptions from the iShares MSCI
Emerging Markets Index fund, also the most since
February 2011. The MSCI Emerging Markets Index fund has about
one-tenth the assets of all emering markets equity funds,
and has lost nearly 10 percent in just one month.
The flight from emerging markets accelerated Tuesday after
the Bank of Japan left its monetary policies unchanged, dashing
hopes for additional stimulus measures and triggering a global
selloff in the equity market.
Japanese equities had outflows for the second consecutive
week, with investors pulling $53 million from the funds. Until
the week ended June 5, Japanese equities had seen inflows for 28
All equity funds had net outflows of $608 million. Domestic
equities had inflows of $1.28 billion, while non-domestic
equities had outflows of $1.89 billion.
The BOJ decision added to existing worries that the Fed
would begin to trim its $85 billion of monthly stimulus in the
near future. Fed officials hinted on May 22 that the central
bank may reduce its quantitative easing in the coming months.
The benchmark S&P 500 rose 0.23 percent over Lipper's
ETFs and mutual funds that invest in Treasury Inflation
Protected Securities have been experiencing outflows as
investors pulled back on bets that loose monetary policies from
central banks would trigger runaway inflation.
For example, iShares Barclays TIPS Fund has seen
some of the heaviest outflows this year among U.S.-listed ETFs
with net redemptions of $329 million in the latest week.
The WisdomTree Japan Hedged Equity Fund had outflows
for the second consecutive week after seeing inflows since
ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
The weekly Lipper fund flow data is compiled from reports
issued by U.S.-domiciled mutual funds and exchange-traded funds.
The following is a broad breakdown of the flows for the
week, including exchange-traded funds (in $ billions):
Sector Flow Chg % Assets Assets Count
All Equity Funds -0.608 -0.02 3,301.776 10,326
Domestic Equities 1.281 0.05 2,476.662 7,633
Non-Domestic Equities -1.890 -0.23 825.114 2,693
All Taxable Bond Funds -5.509 -0.34 1,595.386 4,967
All Money Market Funds -5.222 -0.22 2,339.810 1,356
All Municipal Bond Funds -1.605 -0.50 318.932 1,400
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