Reuters: Financial Services and Real Estate: Investors seek shelter in US bond funds for 30th straight wk-EPFR

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Investors seek shelter in US bond funds for 30th straight wk-EPFR Jun 1st 2012, 21:09 By Sam Forgione NEW YORK, June 1 | Fri Jun 1, 2012 5:09pm EDT NEW YORK, June 1 (Reuters) - U.S. bond funds took in $1.76 billion in the week ended May 30, the 30th consecutive week of inflows, as risk aversion took hold on worries the euro zone debt crisis is worsening, EPFR Global said on Friday. Investors were concerned about Spain's ability to rescue its banks, which are sitting on massive amounts of soured real estate investments. DoubleLine's CEO and CIO Jeffrey Gundlach said: "Since the Spanish banking system's foundation is almost certain to deteriorate further, the markets' movements of recent weeks should continue until they elicit some form of aggressive response. That moment will likely coincide with the low point in U.S. interest rates." Benchmark 10-year Treasury notes yields traded as low as 1.442 percent on Friday, the lowest in records going back to the early 1800s, according to data gathered by Reuters. Regarding the investor response to the European debt situation, Gundlach said: "The Genie's not going to go back into the bottle. And that alters their behavior." EPFR Global also reported inflows of $7.36 billion into U.S. equity funds, but noted that a single ETF tracking the S&P 500 accounted for the majority of the gains. Only $72 million went into actively-managed U.S. equity funds, and those were from institutional investors. Retail investors avoided the funds, EPFR Global's Director of Research Cameron Brandt added. The S&P 500 fell 0.42 percent over the period as Spain's banking system faltered and investors feared Greece would exit the euro. "Certainly based on the bond market reaction the entire week-the violent moves that we had-people are bracing for the worst in Europe," said Robert Francello, head of equity trading for Apex Capital in San Francisco. Investors showed little appetite for riskier bonds. High-yield "junk" bond funds lost $1.1 billion to outflows, albeit less than the previous week's outflows of $3.05 billion, while emerging market bond funds lost $464 million to outflows. Emerging market equity funds fared even worse and lost $1.15 billion to outflows, a modest improvement from last week's outflows of $1.54 billion. Money market funds had net inflows of $2.16 billion globally, far less than inflows of $11.45 billion the previous week but still strong in comparison to other assets. Investors have sought the low risk of money market funds as places to park money and buy time until Europe's issues clear up, said Richard Sichel, chief investment officer of Philadelphia Trust Co. European equity funds lost $998 million in outflows as investors remained detached from the region's risks. European bond funds also suffered outflows of $79 million. Both were moderate improvements from the previous week's outflows of $1.66 billion from European equity funds and $229 million from European bond funds. There has been "a general backing away from any investments in the area," said Sichel, who added that investors were worn down by the lack of progress during the last summit of European policymakers to discuss Greece's debt crisis. ASIA AND SECTOR-SPECIFIC FUNDS Asia ex-Japan funds had $606 million in outflows, a slight improvement from the previous week's outflows of $768 million. News out of China was mixed over the period, as efforts to ramp up stimulus spending offset reports of weak factory growth. Japan saw the highest inflows amongst country-specific funds of $571 million, which were still less than inflows of $1.23 billion the previous week. Funds that focus on energy stocks saw inflows of $858 million, a rebound from outflows of $1.15 billion the previous week. Gold and precious metals funds gained $439 million in new money, bouncing back from the outflows of $631 million the previous week on account of their safe-haven appeal, said EPFR Global's Brandt. Link this Share this Digg this Email Reprints

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