Investors poured $5.3 billion into bond funds worldwide in the latest week while pulling profits out of stock funds after market gains in 2013, data from a Bank of America Merrill Lynch Global Research report showed today.
The inflows into bond funds in the week ended January 8 marked the biggest cash surge since May of last year, while stock funds posted outflows of $400 million. Demand stumbled for funds that mainly hold U.S. stocks, which posted outflows of $2.2 billion.
Investors sought bonds with varying degrees of risk. Investment-grade bond funds, which are viewed as safer given higher-quality credit ratings, attracted $3 billion.
Riskier high-yield junk bond funds, meanwhile, attracted $1 billion, according to the Bank of America Merrill Lynch report, which also cited data from fund-tracking firm EPFR Global.
The demand for bond funds in the first week of 2014 could mark a reversal in sentiment toward bonds, which suffered a selloff last year on worries of a pullback in the U.S. Federal Reserve's $85 billion in monthly bond-buying stimulus.
"As investors take some money off the table in equities, that inevitably forces them into bonds," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington D.C.
Bond funds worldwide attracted a meager $1.4 billion in new cash last year after being hit by persistent withdrawals from the funds, according to data from Bank of America Merrill Lynch and EPFR Global reported by Reuters last week.
The inflows into riskier junk bond funds marked the third straight week of new demand for the funds. Funds that hold government debt, mainly safe-haven U.S. Treasuries, attracted $900 million, marking their largest inflows in 18 weeks.
Despite the appetite for bond funds, the yield on the 10-year U.S. Treasury barely budged over the weekly period and ended at 2.99 percent.