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US-based taxable bond funds attract $3.4 bln in week: Lipper

Investors in U.S.-based funds poured $3.4 billion into taxable bond funds in the week ended June 24 after worries over Greece's finances spurred a flight into safer bonds, data from Thomson Reuters' Lipper service showed on Thursday. The inflows marked the first new demand for the funds in three weeks.

Funds that mainly hold safe-haven U.S. Treasurys attracted $437 million to mark their first inflows in five weeks, while riskier high-yield bond funds attracted $621 million to mark their first inflows in three weeks. Funds that hold investment-grade bonds posted $366 million in outflows to mark their third straight week of outflows. The funds had not posted three straight weeks of outflows since August 2011.

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Stock funds posted $1 billion in outflows to mark their first investor withdrawals in five weeks. Funds that specialize in European stocks attracted $160 million to mark their sixth straight week of inflows.

Wall Street
Brendan McDermid | Reuters

All of the inflows went into international-focused stock funds, which attracted their 20th straight week of inflows at $1.5 billion. Investors soured on funds that specialize in U.S. shares and pulled $2.6 billion, reversing the prior week's $4.5 billion in inflows.

The preference for bond funds showed a flight to safer assets, said Tom Roseen, head of research services at Lipper. While investors in riskier high-yield bond funds may have bet that Greece's issues would be resolved, investors in safe-haven Treasury funds were less optimistic on the Greek negotiations, Roseen said. He also said investors digested a statement from the Federal Reserve on June 17 and concluded that the central bank would be slow in raising rates.

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Rate hikes are expected to hurt bond prices. Roseen said the outflows from U.S.-focused stock funds, which were entirely from mutual funds, showed skittishness on the part of retail investors in response to volatility in stock markets. Mutual funds are commonly purchased by retail investors.

"Retail investors are likely to sit on the sidelines to let this play out," Roseen said.

While the benchmark S&P 500 stock index rose 0.4 percent over the period, U.S. stocks gyrated in response to developments out of Greece. Funds that specialize in energy shares attracted $228 million, their first inflows in six weeks. The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.