October 20, 2016 / 11:22 PM / a year ago

UPDATE 1-Investors find love for bonds again, except for munis

(Adds data on mutual funds and ETFs, context, analyst quote,
table and byline)
    By Trevor Hunnicutt
    NEW YORK, Oct 20 (Reuters) - U.S.-based bond funds charged
back into the good graces of investors during the latest week,
attracting $3.4 billion, Lipper data showed on Thursday.
    Investors pulled the same amount from U.S.-based stock funds
during the seven days through Oct. 19, the research service
said.
    The week also marked a dour milestone for municipal bond
funds, which broke a streak of inflows that lasted 54 weeks and
showered more than $60 billion into a debt market that finances
U.S. cities and states.  
    By contrast, investment-grade corporate debt funds
rebounded, taking in $2.4 billion of cash after $666 million in
outflows the week before, the data showed.
    The bonds have been popular this year for investors seeking
refuge from perceived risks in other markets even though a
potential U.S. rate hike this year could slice bond prices.
    "It may be that equities are so distasteful, and bonds offer
better returns than money markets," said Pat Keon, research
analyst for Thomson Reuters Lipper.
    Money market funds recorded $7.7 billion in outflows during
the same period, the data showed. Investors park cash in those
funds, but they have been moving money elsewhere as U.S.
regulatory reforms took effect on Friday requiring some funds to
let their share prices float with the market. 
    Sentiment around stocks was mixed, with stock
exchange-traded funds taking in money as mutual funds focused on
that market extended a long streak of withdrawals.
    The stock withdrawals were focused almost exclusively on
funds invested in U.S. equities.
    Healthcare sector funds posted $646 million in outflows,
bleeding the most cash since May. Hillary Clinton, the
Democratic nominee in the Nov. 8 U.S. presidential race, has
pushed for lower drug prices in statements that hurt shares of
Mylan NV and Valeant Pharmaceuticals International
. 
    Chinese stock funds took in $257 million in their 10th
straight week of inflows. Data on Wednesday showed that China's
economy grew at a steady 6.7 percent, further easing fears that
a "hard landing" for that economy might derail global growth.
 
    The following is a broad breakdown of the flows for the
week, including ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          -3.351    -0.06     5,289.055  12,014
 Domestic Equities         -3.385    -0.09     3,723.738  8,582
 Non-Domestic Equities     0.033     0.00      1,565.316  3,432
 All Taxable Bond Funds    3.446     0.15      2,350.097  6,041
 All Money Market Funds    -7.683    -0.33     2,325.642  1,037
 All Municipal Bond Funds  -0.136    -0.03     393.194    1,412
 
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Andrew Hay)

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