U.S. taxable bond funds attract most cash in 2 years -ICI

NEW YORK, July 26 (Reuters) - U.S. fund investors darted into taxable bonds for a 33rd straight week, injecting the most cash into the category since June 2015, Investment Company Institute (ICI) data showed on Wednesday. Nearly $12.8 billion flowed into the taxable bond mutual funds and exchange-traded funds during the week ended July 19, according to ICI, reinforcing a strong investor preference for debt despite low yields and uncertainty over central bank policy. successive week of withdrawals, returning $4.5 billion to investors. Non-domestic funds attracted $7.5 billion, the trade group said. Funds focused on stocks in the United States have been less popular than their internationally focused counterparts in 22 of 29 weeks this year, the data shows. Jeremy Schwartz, director of research at WisdomTree Asset Management Inc, said stocks are a more appealing value than bonds but that investors' desire to cut risk is driving them to bonds. "Markets are expensive compared to history. Bonds are much more expensive compared to history," said Schwartz. "Demographics are dominating these allocations." Investors in target-date funds and other professionally managed accounts typically move to more bond-heavy portfolios as they near retirement. Separate ICI data shows bond holdings increase as people leave jobs and roll over assets from employer-sponsored 401(k) retirement accounts to individual retirement accounts. Yet the U.S. 10-year debt benchmark has not delivered a yield above 3 percent in more than three years and investors continue to debate whether inflation is robust enough to support a goal by the Federal Reserve to continue raising U.S. interest rates and to start unwinding its $4.5 trillion cache of Treasury bonds and other assets. Commodity funds, including those invested in precious metals, posted $1 billion in withdrawals, their largest outflows since December 2016, ICI said. Higher bond yields hurt demand for gold, which does not pay a yield. The following table shows estimated ICI flows for mutual funds and exchange-traded funds (all figures in millions of dollars):

7/19 7/12 7/5 6/28 6/21/2017 Equity 2,976 3,018 -6,478 2,143 684 -Domestic -4,542 -2,118 -11,551 -4,571 -7,876 -World 7,518 5,136 5,073 6,714 8,560 Hybrid -664 -688 -481 -614 -488 Bond 13,599 4,780 5,825 5,404 6,313 -Taxable 12,799 4,438 6,072 4,460 5,391 -Municipal 801 341 -248 943 922 Commodity -1,014 -249 -583 394 90 Total 14,898 6,861 -1,718 7,327 6,600

(Reporting by Trevor Hunnicutt; Editing by James Dalgleish)