Global bond funds post massive outflows in the week to May 4

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A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City

(Reuters) – Global bond funds faced big outflows in the week to May 4 as soaring inflationary pressure fueled caution ahead of the Federal Reserve’s policy decision this week.

According to Refinitiv Lipper, investors exited global bond funds worth $11.99 billion in their fifth weekly net selling in a row.

Fanning inflationary fears, data last week showed strong U.S. consumer spending in March and a jump in labor costs in the first quarter, which raised concerns that the Fed would tighten policy more aggressively than planned earlier.

After an expected 50 basis point policy rate hike on Wednesday, the Fed Chairperson Jerome Powell, ruled out raising rates by 75 basis point in a coming meeting, although he made clear that rate increases the Fed already has in mind were “not going to be pleasant”.

U.S. and European bond funds suffered outflows of $5.58 billion and $6.24 billion respectively, while Asian funds had marginal selling worth a net $0.03 billion.

Weekly net selling in global short- and medium-term bond funds jumped to over a four month’s peak of $6.9 billion but government bonds funds gained $6.18 billion in their biggest weekly inflow since at least June 2020.

Meanwhile, weekly outflows from global equity funds eased to a four-week low of $1.79 billion.

By sector, financials and tech witnessed net selling of $634 million and $483 million respectively, however, utilities and consumer staples received inflows of $497 million and $457 million respectively.

Money market funds saw outflows of $10.79 billion after attracting purchases of $51.72 billion in the prior week.

Commodities funds’ data showed precious metal funds faced outflows worth $402 million and energy funds posted net selling of $97 million in a seventh straight week of outflows.

An analysis of 24,183 emerging market funds showed net selling in both equity and bond funds eased to a three week low of $565 million and $328 million respectively.

(Reporting by Gaurav Dogra in Bengaluru; Editing by Louise Heavens)