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 mutual funds pumped the most new money into bond funds in nearly three years as the exodus from stock funds continued amid renewed global economic jitters, data from the Investment Company Institute showed on Wednesday.

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

Stock funds, meanwhile, had outflows of $11.08 billion, the most 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 the reporting period after news that U.S. manufacturing activity rose in September, but uncertainty loomed over whether Spain would seek a European bailout to reduce its borrowing costs.

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

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

Hybrid funds, which can invest in stocks and fixed income securities, attracted $2.26 billion in inflows, the most since late August.

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

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

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

(Reporting by Sam Forgione)