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U.S. Bond Funds Drew $219 Million Last Week in Rebound

U.S. fixed-income mutual funds attracted investor deposits last week, rebounding from redemptions spurred by speculation that the Federal Reserve would scale back its unprecedented stimulus, while bond exchange-traded funds had withdrawals.

Investors put $219 million into U.S. taxable-bond mutual funds while pulling $456 million from bond ETFs in the week ended July 10, Denver-based research firm Lipper said yesterday in an e-mailed statement. They deposited more than $3 billion in bond mutual funds and ETFs combined during the week ended July 3, the first week of net deposits in five weeks. U.S. bond funds had withdrawals of $23.7 billion in the four weeks ended June 26, the most since October 2008, Lipper said.

“Taxable-bond fund investors were of two minds,” Lipper said in the statement. “Neither amount reflected a strong opinion on bonds.”

The flight from bonds was triggered by Fed Chairman Ben S. Bernanke, who told Congress on May 22 that the U.S. central bank may start reducing its bond purchases. Bernanke said in a speech on July 10 that the U.S. economy needs “highly accommodative monetary policy for the foreseeable future.”

Investors pulled about $60 billion from U.S. bond funds in June, the biggest monthly redemptions in records going back to 1961, according to estimates from the Investment Company Institute. Pacific Investment Management Co., the world’s largest active fixed-income manager, had a record $14.5 billion in net redemptions last month.

U.S. taxable-bond mutual funds had withdrawals of $5.1 billion in the week ended July 2, compared with $20.5 billion a week earlier, according to ICI estimates.

Municipal-bond mutual funds saw redemptions accelerate in the latest week as $1.1 billion was pulled, Lipper said. Municipal-bond ETFs had withdrawals of $116 million.

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