(Reuters) – Global investors have massively reduced their positions in bond and equity funds in the week ending May 18 on inflation concerns and the fact that rising interest rates will lead to a recession.
According to Refinitiv Lipper, investors exited $18.57 billion net worth of global bond funds, marking the largest weekly outflow since Feb. 16.
(Graph Fund Flows: Global Equities Bonds and Money Market: https://fingfx.thomsonreuters.com/gfx/mkt/jnvwezwdxvw/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg)
The expectation of higher interest rates follows Federal Reserve Chair Jerome Powell’s comments this week that the central bank will “keep pushing” for tightening US monetary policy until it is clear that inflation is coming down.
UK inflation hit its highest annual rate since 1982 in April, while Canada reported a stronger-than-expected rise.
US and European bond funds recorded net sales of $8.41 billion and $8.14 billion, respectively, while Asian funds attracted small inflows of $0.06 billion.
Global short- and intermediate-term bond funds posted net sales of $4.62 billion for the nineteenth straight week, and high-yield funds posted outflows of $5.17 billion.
Treasury funds, however, remained popular as they attracted $5.45 billion in net buying for the third straight week.
(Graph – Global Bond Fund Flows in the week ended May 18: https://fingfx.thomsonreuters.com/gfx/mkt/byvrjdrwxve/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20May%2018 .jpg)
Global equity fund selling continued for the sixth straight week, though outflows of $6.26 billion were about 54% lower than the previous week.
Among sector funds, financials and consumer discretionary lost $2.07 billion and $0.84 billion in outflows, respectively, but utilities and healthcare gained $1.12 billion and $0.81 billion in inflows, respectively .
(Chart: Fund Flows: Global Equity Funds: https://fingfx.thomsonreuters.com/gfx/mkt/zgpomerxnpd/Fund%20flows-%20Global%20equity%20sector%20funds.jpg)
Investors also sold money market funds valued at $7.62 billion for the third straight week of net sales.
Data for commodity funds showed investors dumped $1.57 billion in precious metals funds in their largest weekly net sale in 14 months, while energy funds saw outflows of $249 million.
An analysis of 24,262 emerging-market funds found that investors sold $1.38 billion in equity funds and $4.36 billion in bond funds, marking a sixth straight weekly outflow.
(Chart: Fund Flows: EM equities and bonds: https://fingfx.thomsonreuters.com/gfx/mkt/akvezrawepr/Fund%20flows-%20EM%20equities%20and%20bonds.jpg)
(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Barbara Lewis)
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