July 16, 2021

(Reuters) – Investments into global bond funds dropped sharply in the week to July 14, as a jump in U.S. inflation rates raised fears that rising price pressures may lead the Fed to tighten policy rates soon.

According to Refinitiv Lipper data, global bond funds received inflows worth $5.2 billion over that period, a 72% drop compared with previous week.

Some analysts also said investors booked profits during the week after an extended rally in bond prices in the weeks before.

Graphic: Fund flows into global equities bonds and money markets: https://fingfx.thomsonreuters.com/gfx/mkt/ygdvzzxbavw/Fund%20flows%20into%20global%20equities%20bonds%20and%20money%20markets.jpg

Inflation-linked bonds continued to receive money, bagging $553 million – their 11th consecutive weekly inflow.

Meanwhile, inflows into global equity funds increased in the week, as fears over the Delta variant of the coronavirus abated.

The data showed global equity funds received an inflow of $2.4 billion, a 37% increase over the previous week.

UBS said a recovery in market sentiment from worries over peaking growth and the spreading Delta variant helped U.S. equities touch near-record highs this week.

It added that U.S. equities remain well supported by robust earnings growth.

Among equity sector funds, health care funds attracted $1.56 billion, their biggest weekly inflow this year.

Consumer discretionary and financial sector funds witnessed outflows worth $613 million and $449 million respectively.

Graphic: Global fund flows into equity sectors: https://fingfx.thomsonreuters.com/gfx/mkt/azgpoqozdpd/Global%20fund%20flows%20into%20equity%20sectors.jpg

Global money market funds faced outflows worth $18.6 billion, suggesting investors were willing to take higher risks during the week.

Among commodity funds, precious metal funds had $197 million worth of outflows.

An analysis of 23,720 emerging-market funds showed investors sold $360 million in bond funds, after two straight weeks of buying. Also, they sold $220 million in emerging equity funds, their fourth successive weekly selling, the data showed.

Graphic: Fund flows into EM equities and bonds: https://fingfx.thomsonreuters.com/gfx/mkt/jbyvrzgeyve/Fund%20flows%20into%20EM%20equities%20and%20bonds.jpg

Graphic: Global bond funds flows in the week ended July 14: https://fingfx.thomsonreuters.com/gfx/mkt/xlbvgqkzkvq/Global%20bond%20funds%20flows%20in%20the%20week%20ended%20July%2014.jpg

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Andrew Heavens)

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