U.S. fund investors put most cash in 'junk' since late 2016

By Trevor Hunnicutt

NEW YORK, Jan 17 () - U.S. fund investors charged into high-yield "junk" bonds during the latest week, pouring in $3.3 billion, the most cash flowing into that market since late 2016, Lipper said on Thursday, boosted by soothing words by Federal Reserve Chairman Jerome Powell.

Underscoring investors' appetite for some risk-taking, investors pulled $15 billion net cash from U.S.-based money market funds, according to the Refinitiv research service. For their part, U.S.-based equity mutual funds - which exclude exchange-traded funds - posted inflows of $4.8 billion, Lipper data showed.

Last week, Powell reiterated that the Fed plans to evaluate the health of the economy before moving ahead with any new interest rate increases.

The $15 billion net outflow from money markets "indicates that investors are taking money off the sidelines and putting it back to work as well as the net inflows into below investment- grade debt funds - high-yield funds and high-yield muni funds," Keon said.

"The outflows from Loan Participation funds are a long-term trend starting in the early part of Q3," Keon said. The peer group has been hurt by the Fed's slowing its pace of rate hikes, as bank loans are floating rates.

"It's possible the sector was overbought as well as prior to the downturn at the start of Q4, they had net inflows in 34 of the previous 35 weeks," Keon said.

Energy sector stock funds recorded $1.3 billion in outflows in the same week, the largest withdrawals since October 2014, even as oil prices edged off the 1-1/2-year lows hit last month.

The cash withdrawals for energy sector funds were concentrated mostly in two ETFs - SPDR S&P Oil & Gas, with $641 million of net cash outflows, and Energy Select Sector SPDR, with $576 million of net cash outflows, Keon noted.

The following is a breakdown of the flows for the week, including mutual funds and ETFs:

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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