Global equity funds see drop in demand on rising US Treasury yields

(Reuters) - Demand for global equity funds declined sharply in the week through Jan. 15, as U.S. Treasury yields rose and expectations for the Federal Reserve's interest rate cuts fell following a robust jobs report.

Global equity funds witnessed just $37.79 million worth of net purchases during the week, the smallest weekly buying since Dec. 18, 2024, as per LSEG Lipper data.

Last week, investors pondered possibility that the Fed may have finished cutting rates as data from the Labor Department showed U.S. job growth accelerated in December, while the unemployment rate fell to 4.1% from 4.2% in November.

The benchmark 10-year yield climbed to 4.805% following the report, its highest level since November 2023.

However, the core U.S. inflation reading for December came in below expectations on Wednesday, reigniting hopes for further cuts.

During the week ended Jan. 15 , investors withdrew a net $8.23 billion from U.S. equity funds, the largest outflow since December 18, 2024, while investing $5.07 billion and $1.62 billion in Asian and European funds, respectively.

Sectoral equity funds saw $447 million in inflows, driven by a $1.08 billion investment into the financial sector.

Meanwhile, global bond funds attracted $8.88 billion, a sharp decline from the previous week's $19.67 billion.

Short-term global bond funds received $5.02 billion and loan participation funds drew $1.39 billion, but government bond funds only saw $137 million in inflows, the lowest in three weeks.

Money market funds faced $94.13 billion in net sales, a reversal from the prior week's $158.68 billion in purchases.

Precious metal funds ended a two-week selling streak with $327.55 million in purchases, while energy funds saw outflows for the sixth week, losing $54 million.

Emerging market data for 29,634 funds showed equities witnessed $4.06 billion worth of divestment, the largest weekly outflow in seven weeks. Bond funds, however, garnered a net $798 million worth of net purchases.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Varun H K)

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