Bond Market Awaiting Federal Reserve Decision

By Marc Castro

Jun 15, 2013 12:55 PM EDT

According to data collated by EPFR Global, investors had withdrawn a record US$14.45 billion from bond funds in the latest week. This was brought forth on the rumors that the Federal Reserve Bank that it would be reducing its stimulus program.

Also uncovered in the research was that mutual fund investors pulled out US$8 billion from stock funds. Emerging market funds also had their largest redemptions of the year during the week that ended June 12 of this year.

The heavy redemptions had come from the previous record high of US$12.53 billion outflow from EPFR tracked bond funds from the previous week. On the other hand, high yield bond funds had outflows amounting US$6.48 billion, which was the highest recorded outflow since these funds were tracked since May of 2003.

Many investors have remained cautious as to the Fed's actions if it should scale back the monthly US$85 billion in bond purchases moving forward. This seems to be the path taken as the Fed Chairman Ben Bernanke has said that it may reduce its quantitative easing program in the 'next few meetings.'

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