US bond funds draw inflows for a 16th straight week

(Reuters) - U.S. bond funds attracted inflows for a 16th straight week in the week ended Sept. 18, on expectations that the Federal Reserve would deliver an outsized rate cut in its meeting during the week.

According to LSEG data, investors bought a net $6.76 billion worth of US bond funds during the week, registering the highest weekly inflow in three weeks.

The Federal Reserve reduced interest rates by half a percentage point on Wednesday, initiating what is anticipated to be a gradual easing of monetary policy with an unusually large reduction in borrowing costs, prompted by increasing concerns about the health of the job market.

U.S. general domestic taxable fixed income funds attracted a robust $2.19 billion in inflows, the highest weekly total since July 24. Investors also heavily invested in short-to-intermediate investment-grade funds and municipal debt funds, with significant inflows of $1.78 billion and $718 million, respectively.

Meanwhile, weekly net sales in U.S. equity funds eased to a four-week low of $1.37 billion.

Investors bought $467 million in U.S. small-cap funds after two consecutive weeks of net selling. However, large-cap, mid-cap, and multi-cap funds continued to see net outflows of approximately $602 million, $565 million, and $271 million, respectively.

Sector funds were out of favor for a fourth straight week, witnessing $557 million in net sales. Investors ditched financial and tech sector funds of a significant $983 million and $389 million, respectively but snapped up real-estate funds of a net $561 million.

U.S. money market funds, meanwhile, registered their first weekly outflow in seven weeks, worth about $29.19 billion on a net basis.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Nick Zieminski)

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