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Us Bond Funds See Largest Weekly Inflows Since July Amid Rate Cut Expectations

US Bond Funds See Largest Weekly Inflows Since July Amid Rate Cut Expectations

U.S. bond funds racked up solid inflows in the week to August 28 thanks to a robust purchase in government bond funds, driven by bets of a Federal Reserve interest rate cut in September and investor caution over geopolitical tensions in the Middle East.

According to LSEG data, U.S. bond funds witnessed a net $9.58 billion worth of purchases during the week, the largest inflow for a week since July 17.

Traders have fully priced in a cut in September, with a 67% chance of a 25 basis point reduction and a 33% chance of a bigger 50 bp easing, the CME Fed Watch tool showed.

Investors channeled a hefty $5.42 billion into U.S. government bond funds, booking their largest weekly net purchase since Oct. 2023.

They scooped up U.S. short/intermediate government and Treasury funds of $4.84 billion in their largest weekly net purchase since March 2023. U.S. short/intermediate investment-grade funds had $1.89 billion worth of inflows.

At the same time, money market funds secured a fourth weekly inflow in a row, to the tune of about $10.62 billion.

Simultaneously, U.S. equity funds observed a net $2.83 billion worth of sales during the week following net purchases of $6.58 billion in the previous week.

Investors pulled $1.35 billion out of large-cap funds in a partial redemption of $5.33 billion worth of net purchases in the prior week. Mid-cap and multi-cap funds also lost $798 million and $168 million, respectively, in outflows.

Small-cap funds still gained a second weekly inflow, which amounted to $1.03 billion on a net basis.

By sector, investors shed consumer staples, healthcare, and utilities sector funds of a notable $528 million, $337 million, and $208 million, respectively. The financials sector, meanwhile, gained a third weekly inflow, worth about $783 million.

(Source: Reuters)