U.S. bond funds gain biggest weekly inflow in 11-months

(Reuters) – U.S. bond funds recorded their biggest weekly purchase in eleven months in the week to Aug. 3 on expectations that slowing growth would prompt the Federal Reserve to slow down the pace of its rate hikes to aid the economy.

According to Refinitiv Lipper data, U.S. bond funds obtained a net $9.37 billion in purchases, the biggest weekly inflow since Sept. 1.

GRAPHIC:Fund flows: US equities bonds and money market funds (https://fingfx.thomsonreuters.com/gfx/mkt/jnpwenyzapw/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg)

The U.S. gross domestic product fell at a 0.9% annualized rate in the second quarter, while the growth in U.S. factory activity weakened to a two-year low in July, data released during the reported week showed, casting worries about the economy.

Due to those concerns, the 10-year benchmark yield hit a four-month low of 2.516% earlier this week.

U.S. government and municipal bond funds obtained $2.83 billion in inflows after a weekly outflow, while high yield and general domestic taxable fixed income funds received a net $3.7 billion and $2.61 billion, respectively.

GRAPHIC:Fund flows: US bond funds (https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnagdmvq/Fund%20flows%20US%20bond%20funds.jpg)

U.S. equity funds recorded outflows of $6.84 billion, which compares with purchases of $688 million in the previous week.

Investors sold U.S. large- and mid-cap funds of $8.95 billion and $152 million, respectively, but small-cap funds gained $1.17 billion in inflows. Both equity growth and value funds witnessed disposals of about $1.7 billion each.

GRAPHIC:Fund flows: US growth and value funds (https://fingfx.thomsonreuters.com/gfx/mkt/akpezkqrnvr/Fund%20flows%20US%20growth%20and%20value%20funds.jpg)

U.S. sector specific funds, however, witnessed some purchases with consumer discretionary and financials attracting $790 million and $541 million, respectively.

GRAPHIC:Fund flows: US equity sector funds (https://fingfx.thomsonreuters.com/gfx/mkt/zgvomgbeavd/Fund%20flows%20US%20equity%20sector%20funds.jpg)

Meanwhile, investors withdrew $9.4 billion out of money market funds after four straight weeks of net purchases.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Shailesh Kuber)