Chart: As Treasury yields fall, US equity funds attract inflows again

Reuters October 16 - As of the week ending October 14, U.S. stock funds attracted net inflows, reversing net outflows seen in the previous week. This was mainly because U.S. Treasury yields retreated from their recent highs, and investors are optimistic about the upcoming strong earnings season; however, concerns over rising debt levels (link) continue to prompt outflows from the technology sector.

According to LSEG Lipper data, investors made net purchases of $13.01 billion in U.S. stock funds during the week, turning around from $5.1 billion in net redemptions the previous week.

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Meanwhile, the technology sector saw $5.21 billion in net redemptions, marking the largest weekly outflow since June 24.

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Due to market expectations that the Federal Reserve may keep interest rates unchanged at this month's meeting, the yield on the U.S. 10-year Treasury fell about 26 basis points from last week's 24-and-a-half-year high of 5.3645%. (link)

During the ongoing earnings season, robust corporate profit forecasts have also boosted investor confidence. London Stock Exchange Group (LSEG) data, based on analysts' estimates for 2,076 U.S. large-cap and mid-cap companies, shows that the latest quarterly earnings year-over-year growth rate is projected at 29.99%, with the technology sector expected to achieve a growth rate of 57.64%.

U.S. large-cap stock funds attracted $16.55 billion, reversing approximately $14.08 billion in outflows seen the previous week. Investors also bought $2.12 billion in multi-cap funds and $541 million in small-cap funds, while they sold a net $651 million in mid-cap funds.

U.S. bond funds remained favored for the 26th consecutive week, seeing net inflows of $6.45 billion.

Domestic taxable fixed-income funds recorded $1.91 billion in net inflows, marking the fourth consecutive week of net purchases. Investors also added $1.61 billion to municipal bond funds and $1.12 billion to short- and intermediate-term government bond and Treasury funds.

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Meanwhile, investors redeemed $45.93 billion from money market funds, compared to net purchases of $68.49 billion in the previous week.

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