By Trevor Hunnicutt
NEW YORK, Feb 21 (Reuters) - U.S. fund investors tiptoed back into stocks after pulling the most cash on record the week prior, but they are now punishing bonds, Investment Company Institute (ICI) data showed on Wednesday.
Investors pulled $12.1 billion from bond mutual funds and exchange-traded funds (ETFs) in the United States during the most recent week, the trade group said, marking the most cash drained out of those products since December 2015 and the first week of net withdrawals since 2016.
The skittishness comes after a bout of volatility shook equity markets. That forced holders of richly priced corporate debt to ask whether the yields of high-yield bonds are high enough. Inflationary pressures and the prospect of rising interest rates have also kept investors on edge. The bond fund withdrawals are still just a blip given the hundreds of billions investors cashed out of a rising stock market and funneled into bonds over the past few years. Nearly half a trillion has rushed into U.S.-based bond funds since the beginning of 2016, Thomson Reuters' Lipper unit estimates.
"This is the beginning of a period of higher volatility, and even if the direction is mostly upward for U.S. stocks, it's going to be characterized by higher levels of volatility than we saw in 2017," said Kristina Hooper, global market strategist at Invesco Ltd.
U.S. stock funds took in $1.5 billion during the week, after their brutal $34 billion of withdrawals the week prior, the most on record.
Some $9.1 billion moved into funds focused on stocks outside the United States, while domestic stock funds recorded $7.6 billion of outflows, according to ICI. U.S. stocks have ricocheted following their quick, more-than-10 percent fall around the beginning of February.
The following table shows estimated ICI flows for mutual funds and ETFs (all figures in million of dollars):
2/14 2/71/311/241/17/2018Equity1,511-33,97812,46823,39511,874
Domestic -7,568 -37,0034,533 12,9111,720
World9,0793,0257,935 10,48310,154Hybrid-1,456 -1,393 -182100 -238Bond-12,1147,2968,862 15,1109,261
Taxable-11,4747,8857,017 12,6576,804
Municipal-640 -588 1,845 2,453 2,457Commodity 182939386 1,412 45Total -11,876-27,13621,53340,01720,942(Reporting by Trevor Hunnicutt; Editing by Jonathan Oatis)
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