Individuals Pull Most From U.S. Bond Funds Since 2008

Investors pulled $10.9 billion from U.S. bond mutual funds in the past week, the biggest redemption since October 2008, after speculation that the Federal Reserve may scale back its bond buying sent fixed-income markets lower.

Taxable bond funds suffered withdrawals of $8.7 billion and municipal bond funds lost $2.3 billion in the week ended June 5, according to an e-mailed statement from the Investment Company Institute, a Washington-based trade group. Investors withdrew $942 million from stock funds, the ICI reported.

Retail and institutional investors have been dumping bonds since Fed Chairman Ben S. Bernanke told Congress on May 22 that the central bank’s policy-setting board could start scaling back its bond purchases in its “next few meetings” if the U.S. employment outlook shows sustained improvement. Global bond markets posted their biggest monthly losses in nine years in May.

Individual investors typically own bonds through mutual funds. Institutional investors are big buyers of exchange-traded bond funds, which have also experienced redemptions according to Denver-based Lipper.

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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