GRAPHIC-Global bond funds see outflows on expectations of faster Fed rate moves

BY Reuters | ECONOMIC | 01/14/22 09:40 AM EST

Jan 14 (Reuters) - Global bond funds faced their first weekly outflow in four weeks in the seven days to Jan. 12 on expectations that the U.S. Federal Reserve will raise rates as many as four times this year, triggered by elevated levels of inflation.

Investors sold global bond funds of $2.25 billion, marking their first weekly net selling since Dec. 15, Refinitiv Lipper data showed.

Last week, Fed minutes from its December meeting showed that policymakers agreed to hasten the end of their pandemic-era program of bond purchases, and signalled the central bank may have to raise interest rates sooner than expected.

Investors sold global high yield bond funds of $3.56 billion, the biggest outflow in seven months. Global government bond funds had outflows of $401 million, while purchases of inflation protected funds dropped to a six-month low of $144 million.

Global equity funds attracted $22.92 billion in net buying, a 16% jump from the previous week.

China focused equity funds pulled in $1.1 billion, the biggest in five weeks, while U.S. equity funds secured $7.99 billion, although this was an 11% drop from a week earlier.

Investors bought financial sector funds of $3.25 billion, marking the biggest weekly purchase in 10 months. Industrials attracted $1.05 billion, while consumer staples and tech funds pulled in $0.9 billion each in purchases.

Global money market funds had outflows of $27.02 billion after two consecutive weeks of inflows.

Among commodities, precious metal funds had outflows of $149 million after an inflow in the previous week, while energy funds saw net selling for a fifth successive week, worth $64 million.

An analysis of 24,127 emerging market funds showed equity funds attracted inflows for a third straight week, worth $1.14 billion, although this was a 44% drop from previous week, while bond funds faced outflows of $1.88 billion.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; editing by Jane Merriman)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.