Dovish statements by Federal Reserve Chair Janet Yellen on Wednesday that “caution is appropriate” when raising interest rates sent stocks higher, and bonds (especially two-year Treasuries) rallied. The Dow Jones Industrial Average was up 325 points for the flows week ended March 16 and notched gains on four of the five trading days. Equity exchange-traded fund (ETF) authorized participants were responsible for part of the market rally; they sent about $3.2 billion into SPDR S&P 500 (SPY) and $774 million into PowerShares QQQ (QQQ) while stripping $602 million from SPDR Financial Services (XLF). Equity mutual fund investors, unconvinced by the three-week stock market rally, pulled $4.0 billion from their accounts, shying away from funds in Lipper’s Large-Cap Core Funds (-$1.7 billion) and Emerging Markets Funds (-$1.2 billion) classifications.
Taxable bond mutual funds took in their fourth consecutive weekly net inflows (+$1.3 billion), but this past week’s magnitude was the lightest yet (the previous week it was nearly +$3.4 billion). The Loan Participation Funds classification (+$34 million) finally turned the tide and accumulated net inflows for the first time in 34 weeks. High Yield Funds continued to shovel up money, and this past week saw net inflows of $1.0 billion as investors kept the pedal to the metal for the fourth straight week. Bond ETFs collected $671 million of net inflows; the week’s biggest individual bond ETF net inflows belonged to iShares iBoxx $IG Corporate (LQD, +$687 million), while iShares Short Treasury Bond (SHV, -$242 million) led the net-outflows list.
Municipal bond mutual fund investors added $675 million to their accounts despite a slack week for munis and coming after a four-week slide. Investors pulled back cash hand over fist from their money market funds, which saw net outflows of $35.9 billion for the week, of which institutional investors pulled $33.9 billion and retail investors redeemed $2.0 billion.
