U.S.-based Treasury funds attract most new cash since February: Lipper

September 22, 2016 5:27 PM EDT

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By Sam Forgione and Jennifer Ablan

NEW YORK (Reuters) - Investors poured $1 billion into U.S. Treasury funds in the week ended Sept. 21, the funds' biggest inflows since mid-February, as the Federal Reserve left interest rates unchanged, data from Thomson Reuters' Lipper service showed on Thursday.

Investors also committed $758 million to international and global debt funds, the funds' biggest inflows since late July.

Treasury funds and other taxable portfolios benefited from the Fed's decision this week.

"Fed held pat with no interest rate hikes - providing at least a short reprieve from normalizing interest rates - and there was some concern this week with economics: August retail sales declined for the first month in five and that weekly jobless claims rose slightly to 260,000," said Tom Roseen, head of research services at Thomson Reuters Lipper.

Overall, U.S.-based taxable bond funds attracted $5 billion of inflows over the weekly period, their biggest inflow in six weeks, Lipper data show.

Stock funds posted $3.4 billion in outflows, their fifth straight week of investor withdrawals. Within that category, U.S.-based stock mutual funds posted $2.1 billion of cash withdrawals and stock ETFs posted $1.4 billion of net outflows.

"I think that equity investors are now focused on earnings season, which is just around the corner," Roseen said. "No pressure on interest rates, so yields aren't rising - bond prices aren’t dropping. This was a quasi-good sign for fixed-income investors... although rate hikes are just around the corner or so they seem."

On Wednesday, the Fed signaled that it will likely raise rates just once before year's end. It said in a statement that the U.S. job market has continued to strengthen and economic activity has picked up. But it noted that business investment remains soft and inflation too low and that it wants to see further improvement in the job market.

Investors also put money to work at into higher-quality fixed-income funds. U.S. investment-grade corporate bond funds attracted $2.1 billion of inflows, their 12th straight week of inflows, while junk bond funds posted $274 million of outflows.

U.S. money-market funds posted $17.1 billion of outflows over the weekly period, the sector's fourth straight week of outflows, Lipper said.

Appetite for shares overseas plunged.

U.S.-based funds that invest in Japanese stocks posted $62 million of outflows over the weekly period, their eighth straight week of cash withdrawals. U.S.-based European stock funds posted $751 million of outflows, extending their outflow streak since early June.

(Reporting by Sam Forgione and Jennifer Ablan; Editing by Leslie Adler and Diane Craft)

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