Bond Funds Attract Deposits for First Time in Two MonthsCharles Stein
Investors added money to U.S. bond mutual funds last week for the first time in almost two months as interest rates stabilized and the Federal Reserve provided no new information about plans to curtail its asset-buying program.
Bond funds attracted $2.1 billion in the week ended July 24, according to an e-mailed statement today from the Investment Company Institute, a Washington-based trade group. The last time the funds won deposits was the week ended May 29. In between, investors pulled more than $78 billion from fixed-income funds, ICI data show.
The flight from bond funds was triggered by Fed Chairman Ben S. Bernanke, who rattled markets in May and June by outlining his plan to end the central bank’s unprecedented asset purchases. Bernanke told reporters June 19 that policy makers may start decreasing those purchases later this year and end them by mid-2014 if the economy meets expectations.
The yield on the 10-year Treasury note rose to a peak of 2.74 percent on July 5, according to data compiled by Bloomberg, from 1.93 percent on May 21, the day before Bernanke first raised the possibility of a change in Fed policy. The 10-year note yielded 2.58 percent today.
The Fed said today that persistently low inflation could hamper the economic expansion and pledged to keep buying $85 billion in bonds each month.
Investors added $4.1 billion to taxable-bond funds last week while withdrawing $2 from municipal-bond funds. They added $4.2 billion to stock funds, ICI’s data show.