U.S. bond funds draw inflows for third straight week

(Reuters) – U.S. bond funds obtained net inflows for a third straight week in the seven days to Jan. 25 as investors remained hopeful that the Federal Reserve would deliver a smaller 25 basis-point policy rate hike next week.

Refinitiv Lipper data showed U.S. bond funds obtained a net $4.89 billion worth of inflows, although a tad lower than the previous weeks $5.83 billion worth of net purchases.

The benchmark 10-year U.S. Treasury yield hit a four-month low of 3.368% last week on signs that inflation is cooling off. Meanwhile, money markets are pricing in a 94.7% chance that the Fed will raise rates by 25 basis points to a range of 4.50% to 4.75% next week.

U.S. taxable bond funds attracted $3.75 billion worth of inflows while municipal bond funds drew a net $1.07 billion.

Investors purchased U.S. short/intermediate investment-grade, general domestic taxable fixed income, and emerging markets debt funds worth $1.37 billion, $1.09 billion and $822 million, respectively.

Meanwhile, U.S. equity funds witnessed a tenth straight week of net selling, although outflows during the week stood at just $1.14 billion, the lowest since Nov. 16.

U.S. growth and value funds, both saw withdrawals, worth $3.68 billion and $501 million, respectively.

Among sectors, health care, financials and industrials saw $1.35 billion, $857 million and $774 million worth of disposals.

Meanwhile, money market funds attracted $10.75 billion worth of inflows after facing two weeks of outflows in a row.

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