US investors extend equity fund sell-off amid rising bond yields

(Reuters) – U.S. investors remained net sellers of equity funds in the week to Oct. 25 driven by higher bond yields and concerns over the Israel-Hamas conflict.

According to LSEG data, investors divested a net $2.69 billion worth of U.S. equity funds in the week, registering their sixth consecutive week of net selling.

The yield on U.S. 10-year Treasury bonds climbed to a 16-year peak earlier this week, breaching the 5% mark, driven by expectations of robust growth and a growing fiscal deficit.

In terms of fund categories, U.S. multi-cap, mid-cap, and small-cap funds saw outflows of $2.52 billion, $1.35 billion, and $202 million, respectively. By contrast, large-cap funds attracted inflows of $3.41 billion, the highest in six weeks.

Investors reduced their exposure to financials, healthcare, and consumer discretionary sector funds by $841 million, $511 million, and $313 million, respectively. On the other hand, they allocated $823 million to the technology sector.

Meanwhile, investors sold a net $719 million of U.S. bond funds, a significant decrease from the $3.55 billion net selling in the previous week.

Short/intermediate investment-grade and inflation-protected funds accounted for $1.96 billion and $1.02 million in net selling, respectively. Government bond funds, on the other hand, received a notable $4.47 billion, a substantial increase from the $929 million in net buying the previous week.

At the same time, money market funds attracted $22.7 billion in inflows, rebounding from two consecutive weeks of outflows.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru)