US bond funds face biggest outflows since March 2020

June 17 (Reuters) – US bond funds suffered robust outflows in the week to June 15 as climbing inflation levels raised the odds of a faster pace of interest rate hikes by the Federal Reserve and spurred worries of a recession.

According to Refinitiv Lipper data, investors dumped bond funds valued at USD 18.73 billion, the biggest weekly net selling since March 18, 2020.

Data last week showed US consumer prices accelerated faster than expected in May, leading to the largest annual increase in nearly 40-1/2 years.

The Federal Reserve on Wednesday approved an interest rate increase of 75 basis points, its biggest policy rate hike since 1994, to stem a surge in inflation that US central bank officials acknowledged may be eroding public trust in their power.

US investors offloaded municipal bond funds worth USD 5.93 billion and taxable bond funds of USD 12.94 billion.

They exited high yield bonds funds, general domestic taxable fixed income funds and short/intermediate investment-grade funds worth USD 5.87 billion, USD 5.41 billion and USD 4.74 billion, respectively.

US equity funds also saw outflows worth USD 21.62 billion, which was the biggest weekly net selling since Dec. 15.

Investors sold US large and mid-cap funds of USD 10.26 billion and USD 591 million, respectively, however, small-cap funds obtained USD 2.02 billion worth of inflows.

US growth funds recorded a USD 7.95 billion worth of withdrawals in a 10th straight weekly outflow, while value funds suffered a net selling of USD 6.02 billion.

Among sector funds, financial, metals and mining as well as tech posted outflows amounting to USD 989 million, USD 224 million and USD 144 million, respectively, but utilities lured purchases of USD 249 million.

Meanwhile, investors withdrew USD 8.94 billion out of money market funds after purchases of USD 24.96 billion made in the previous week.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Amy Caren Daniel)