|26 March, 2020

U.S. bond funds post record outflows as coronavirus threatens liquidity

At the same time, investors pulled $6.4bln out of funds that hold U.S. stocks

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., April 2, 2019. Image for illustrative purposes.

Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., April 2, 2019. Image for illustrative purposes.

REUTERS/Lucas Jackson

NEW YORK- Investors pulled $114.4 billion out of mutual funds and exchange-traded funds that hold U.S.-based debt, the largest retreat on record and more than six times the previous high, according to data released Wednesday by the Investment Company Institute.

The pullback came amid rising concerns in the bond market over liquidity and the ability of corporations to repay their debt due to the economic shock of the coronavirus pandemic. Over the last three weeks, investors have pulled more than $163 billion out of bond funds, a steep reversal for a category that had reliably seen inflows for the last three years. The majority of the outflows came from taxable debt funds, though municipal bond funds also posted record outflows.

At the same time, investors pulled $6.4 billion out of funds that hold U.S. stocks after moving $17.6 billion into the category the week before. The benchmark S&P 500 index is now down more than 24% for the year to date after hitting record highs as recently as Feb. 19.

World stocks funds, meanwhile, lost $5.2 billion in assets, extending a losing streak that has now stretched over the last 4 weeks.

The following is a broad breakdown of the flows for the week, including mutual funds and exchange-traded funds in millions of dollars:

(Reporting by David Randall; Editing by David Gregorio) ((David.Randall@thomsonreuters.com; 646-223-6607; Reuters Messaging: david.randall.thomsonreuters.com@reuters.net))