US bond funds suffer outflows on rate worries; money market funds gain traction

investing.com:

(Reuters) — U.S. bond funds saw significant outflows in the week ending Oct. 4, driven by concerns about prolonged elevated interest rates, while money market funds garnered substantial inflows as investors recalibrated their risk exposure amid a bond market sell-off.

U.S. job openings unexpectedly rose in August, keeping investors cautious ahead of a payrolls report on Friday as more strong U.S. jobs data could compel the Federal Reserve to raise interest rates next month.

According to LSEG data, investors offloaded U.S. bond funds worth a net $6.34 billion during the week, the biggest amount since Dec. 21, 2022. Money market funds meanwhile, received about $43.15 billion in inflows, the highest since April 26, 2023.

Due to intense selling by investors, yields on the benchmark 10-year U.S. Treasury bonds, which move inversely to prices, hit a fresh 16-year high of 4.884% this week.

U.S. short/intermediate investment-grade funds booked net disposals of $4.27 billion, the largest weekly outflow since Oct. 2022.

Municipal debt, and loan participation funds also suffered outflows to the tune of $1.27 billion and $940 million respectively. Still, short/intermediate government and treasury funds attracted about $1.7 billion in inflows.

Risk aversion sentiment also derived $3.49 billion worth of withdrawals from U.S. equity funds, a third weekly net sell-off in a row.

Investors exited equity growth funds worth $2.05 billion and value funds worth $1.23 billion.

Notably, consumer staples, healthcare and consumer discretionary sectors observed net outflows of $637 million, $461 million and $397 million, respectively.