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Bond Funds Losing $60 Billion Foreshadow Risk of Fed Exit
Investors have pulled about $60 billion from U.S. bond funds since Federal Reserve ChairmanBen S. Bernanke rattled markets by outlining his plan to end the central bank’s unprecedented asset purchases.....
Retail investors, who fled volatile stock markets to pour about $1 trillion into the perceived safety of bond funds since the beginning of 2009, reversed that pattern in the past month in anticipation of rising rates.
Long-term mutual funds fell by $4.89 billion in the latest week as bond-fund levels continued to decline, according to the Investment Company Institute.
Bond funds have posted outflows for five consecutive weeks amid a run-up in interest rates since late April.
For the week ended July 2, bond funds had outflows of $5.97 billion, compared with prior-week outflows of $28.23 billion. Taxable bond funds slipped by $5.05 billion while municipal bond funds were down by $920 million.
And note that most of the money did not go from bonds to stocks
Equity funds had inflows of $228 million, up from inflows of $45 million in the previous week. Domestic equity funds fell by $2.08 billion, while foreign equity funds gained $2.31 billion.
Treasury 10-year notes rose for a fourth day, the longest rally since February, after Federal Reserve Chairman Ben S. Bernanke called for maintaining stimulus amid division among policy makers on when to slow bond buying.