U.S.-based bond funds see first weekly inflows since July: ICI

By Sam Forgione

NEW YORK (Reuters) - Investors in U.S.-based mutual funds committed $2.4 billion to bond funds in the week ended Oct. 14, marking the first inflows into the funds since the week ended July 22 on expectations that the Federal Reserve could likely delay raising rates until next year.

Most of the inflows went toward taxable bond funds, while funds that hold tax-free municipal bonds attracted $617 million to mark their second straight week of inflows, the data from the Investment Company Institute showed on Wednesday.

Stock funds posted $1.5 billion in outflows to reverse the prior week's modest $326 million in inflows, according to the data from ICI, a U.S. mutual fund trade organization.

Funds that specialize in U.S. shares posted their third straight week of outflows, at $1.4 billion, while funds that specialize in foreign shares posted their first outflows in five weeks, at just $28 million.

The minutes to the Federal Reserve's September meeting may have stoked investor doubts that the U.S. central bank would not hike rates this year given the global economic backdrop, said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates Inc in Toledo, Ohio.

That sentiment likely contributed to the demand for bond funds, Lancz said. A rate hike is expected to hurt bond prices.

According to the minutes released Oct. 8, the Fed thought the economy was close to warranting an interest rate hike in September but decided it was better to wait for evidence that a global economic slowdown was not knocking the United States off course.

Hybrid funds, which can invest in stocks and fixed-income securities, attracted a small $34 million in new cash to mark their first inflows since the week ended July 22.

(Reporting by Sam Forgione; Editing by Jennifer Ablan and Lisa Shumaker)

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