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Global bond funds record biggest weekly outflow in 22-months

Global bond funds witnessed robust outflows ahead of the Federal Reserve’s policy meeting this week, as investors anticipated the central bank would signal a larger number of interest rate hikes this year.

According to Refinitiv Lipper data, investors offloaded global bond funds worth a net $11.29 billion in the week ended January 26, the biggest outflow since April 1, 2020.

U.S. bond funds suffered net outflows of $7.04 billion, while investors sold European and Asian bond funds worth $3.59 billion and $0.03 billion respectively.

Global short- and medium-term and high-yield bond funds witnessed selling of more than $5 billion each, the most in at least six weeks. However, government bond funds received a net $850 million inflow.

Investors also sold inflation-protected bond funds of $476 million, marking the first weekly outflow since Nov. 2020.

In its latest policy update on Wednesday, the Fed indicated it was likely to raise rates in March, as widely expected, and reaffirmed plans to end its pandemic-era bond purchases that month before launching a significant reduction in its asset holdings.

Meanwhile, investors sold a net $7.96 billion of global equity funds, the first outflow in six weeks, on rising tension between Russia and Ukraine.

Global tech sector funds saw outflows of $1.97 billion during the week, the most in nearly three months, while industrial and communication services funds also faced net selling of $749 million and $393 million respectively.

Financial sector funds, however, drew a net inflow of $1.18 billion.

Global money market funds recorded an net inflow of $389 million after two straight weeks of net selling.

Among commodities, precious metal funds pulled in $2.12 billion, their best week since Aug. 2020, but energy saw a third straight weekly outflow, worth $36 million.

An analysis of 24,067 emerging market funds showed equity funds accumulated $3.3 billion in inflows, the biggest in more than 10 months, while bond funds faced outflows of $385 million.
Source: Reuters (Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Kirsten Donovan)

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