U.S. bond funds see highest demand in nearly three years - ICI

By Sam Forgione

NEW YORK, Oct 10 (Reuters) - Investors in U.S.-based mutualfunds pumped the most new money into bond funds in nearly threeyears as the exodus from stock funds continued amid renewedglobal economic jitters, data from the Investment CompanyInstitute showed on Wednesday.

Bond funds took in $10.87 billion in estimated new money inthe week ended Oct. 3, the most since the week ended Oct. 21,2009, said ICI, a U.S. mutual fund trade organization. The bigmove into bond funds comes even after the Federal Reserve tooksteps in September to push down borrowing costs with its plan tobuy up to $40 billion in mortgage securities each month.

Stock funds, meanwhile, had outflows of $11.08 billion, themost since Aug. of 2011 and further slipping after losing about$7.55 billion in investor money the previous week.

The benchmark S&P 500

rose 1.23 percent over thereporting period after news that U.S. manufacturing activityrose in September, but uncertainty loomed over whether Spainwould seek a European bailout to reduce its borrowing costs.

In related news, ICI announced on Wednesday that ChairmanGreg Johnson has been elected to serve for another year. Johnsonis also President and chief executive officer of FranklinResources, Inc and president of Franklin Templeton Companies,LLC.

Municipal bond funds attracted about $2.82 billion ininflows, the most in the roughly five years on record.

Hybrid funds, which can invest in stocks and fixed incomesecurities, attracted $2.26 billion in inflows, the most sincelate August.

The following table shows a breakdown of ICI flows for thepast five weeks (all figures in the millions of dollars):

9/5/12 9/12/12 9/19/2012 9/26/2012 10/3/2012Total Equity -3,467 -3,361 -5,119 -7,546 -11,083Domestic -3,229 -2,804 -4,759 -5,130 -10,599World -238 -558 -359 -2,416 -483Hybrid* 912 1,306 1,635 -386 2,260Total Bond 4,764 8,117 7,990 8,291 10,874Taxable 4,021 6,805 7,545 6,854 8,058Municipal 742 1,313 445 1,437 2,816Total 2,208 6,062 4,506 359 2,052

*Hybrid funds can invest in stocks and/or fixed incomesecurities.

(Reporting by Sam Forgione)