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U.S. fund investors buy into bonds every week of 2017 -ICI

NEW YORK, May 31 (Reuters) - Fund investors binged on bonds during the latest week, sending another $8.1 billion to U.S.-based debt funds that have not recorded a week of withdrawals this year, Investment Company Institute data showed on Wednesday. Taxable bond mutual funds and exchange-traded funds in the United States attracted $7.4 billion, while municipal bond funds pulled in $665 million, the trade group said. The rotation to bonds comes as investors have shown caution around the handsomely priced U.S. stock market. Investors pulled cash from domestic equity funds for the fourth straight week, withdrawing $5.5 billion, according to ICI. But some investors say now is not the time to be wary. "We're fully invested, and we think equity investors should be fully invested," said Chuck Self, chief investment officer at iSectors LLC in Appleton, Wisconsin. He said investors in bonds risk being on the wrong side of an overaggressive move by the U.S. Federal Reserve to raise rates multiple times this year while trimming its bond reserves. Plus, the yields on bonds are puny. "You want to pick up yield here," said Self. "That's the surest source of return for the balance of the year." Fed Governor Lael Brainard on Tuesday said she thinks a rate hike is "likely" coming soon and that she backs shrinking the Fed's balance sheet "before too long." Both moves could send ripples through debt markets. U.S. fund investors are finding refuge not just in bonds, but also in international stocks. Equity funds focused outside the United States attracted $4.7 billion in their 25th straight week pulling cash, ICI said. The following table shows estimated ICI flows for mutual funds and exchange-traded funds (all figures in millions of dollars):

5/24 5/17 5/10 5/3 4/26/2017 Equity -832 4,357 7,421 3,545 11,602 -Domestic -5,491 -5,604 -983 -4,254 6,758 -World 4,659 9,961 8,404 7,799 4,844 Hybrid -212 -315 122 -1,386 566 Bond 8,064 10,381 6,358 7,167 8,614 -Taxable 7,399 9,791 5,721 6,933 7,960 -Municipal 665 591 637 234 653 Commodity -152 -150 288 -14 -7 Total 6,869 14,273 14,188 9,312 20,775

(Reporting by Trevor Hunnicutt; Editing by Jonathan Oatis)