(Reuters) - U.S. investors remained net sellers of bond funds in the week to May 4 as the economy's rising inflationary challenges fanned caution ahead of the Federal Reserve's policy meeting this week.
According to Refinitiv Lipper data, U.S. investors offloaded $5.52 billion worth of bond funds in a 17th straight week of net selling.
Graphic: Fund flows: US equities, bonds and money market funds - https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwgeggvo/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg
The U.S. benchmark 10-year Treasury yield hit nearly a 3-1/2-year high of 3% this week after reports last week showed rising U.S. consumer spending in March and surging labour costs in the first quarter.
After an expected 50-basis-point hike to the central bank's benchmark overnight interest rate on Wednesday, Fed Chair Jerome Powell ruled out raising rates by 75 basis points in a coming meeting, although he made clear the rate increases the Fed already has in mind were "not going to be pleasant."
Investors sold U.S. taxable bond funds worth $3.82 billion and municipal funds worth $1.75 billion.
U.S. short/intermediate investment-grade funds witnessed net selling of $5.46 billion in a 17th straight week of outflows. Loan participation funds, however, obtained inflows of $0.83 billion, the largest amount in three weeks.
Graphic: Fund flows: US bond funds - https://fingfx.thomsonreuters.com/gfx/mkt/byvrjnaomve/Fund%20flows%20US%20bond%20funds.jpg
Meanwhile, U.S. equity funds' weekly outflows eased to a four-week low of $3.76 billion.
U.S. value funds posted their first weekly inflow in seven weeks, worth $854 million, while growth funds saw net selling of $3.93 billion, although that was the lowest outflow in four weeks.
Graphic: Fund flows: US growth and value funds - https://fingfx.thomsonreuters.com/gfx/mkt/akpezyrdovr/Fund%20flows%20US%20growth%20and%20value%20funds.jpg
Among sector funds, tech and financials lost $724 million and $593 million, respectively, in net selling, while utilities saw net buying of $542 million. Graphic: Fund flows: US equity sector funds - https://fingfx.thomsonreuters.com/gfx/mkt/zgvomleqkvd/Fund%20flows%20US%20equity%20sector%20funds.jpg
U.S. money markets drew net purchases of $2.63 billion, although there was a 94% drop in inflows compared with the previous week.