Bond funds suffer biggest redemptions since June as yields surge

Speculation that the Federal Reserve will begin cutting back asset purchases has investors wary
SEP 03, 2013
U.S. bond mutual funds last week suffered their biggest redemptions since June as yields reached a two-year high amid speculation that the Federal Reserve will begin cutting back asset purchases. Bond funds had withdrawals of $11.1 billion in the week ended Aug. 21, the Washington-based Investment Company Institute said today in an e-mailed statement. It was the largest move out of bond funds since the week ended June 26, when $28.2 billion was withdrawn. The yield on the 10-year U.S. Treasury note reached 2.89 percent Aug. 21, the highest since July 2011, according to data compiled by Bloomberg. Rates climbed amid signs that a strengthening U.S. economy could prompt the Fed to scale back its asset-buying program as soon as September. Bonds lose value as rates rise. Investors pulled $7.38 billion from taxable-bond funds last week and $3.77 billion from municipal-bond funds. Funds that buy U.S. stocks had net redemptions of $387 million while those that purchase international equities took in $1.72 billion. (Bloomberg News)

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