U.S. bond funds see biggest weekly outflow in four weeks

© Reuters. FILE PHOTO: Traders work on the floor of the New York Stock Exchange in New York, U.S., March 16, 2020. REUTERS/Lucas Jackson

(Reuters) - U.S. bond funds saw a surge in outflows in the week to May 11 on concerns over higher inflation readings, which cemented expectations of aggressive rate hikes by the Federal Reserve.

According to Refinitiv Lipper data, U.S. bond funds faced capital withdrawals for the 18th straight week, amounting to $10.42 billion, nearly twice the $5.9 billion in disposals in the previous week.

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

The U.S. benchmark 10-year Treasury yield hit a 3-1/2-year high of 3.203% this week on fears over higher inflation levels.

U.S. headline consumer prices rose 8.3% in April year-on-year, beating economists' forecasts for 8.1%, data showed on Wednesday.

Investors sold U.S. taxable bond funds worth $7.72 billion, about 95% larger withdrawal from a week ago, while municipal funds suffered outflows of $2.76 billion.

U.S. short/intermediate investment-grade funds witnessed net selling of $7.28 billion in the biggest weekly outflow since April 2020. However, U.S. short/intermediate government & treasury funds lured inflows of $2.62 billion.

GRAPHIC: U.S. bond funds https://fingfx.thomsonreuters.com/gfx/mkt/znpnemylovl/Fund%20flows%20US%20bond%20funds.jpg

Meanwhile, investors offloaded U.S. equity funds worth $8.46 billion in a fifth straight weekly outflow.

GRAPHIC: U.S. growth and value funds https://fingfx.thomsonreuters.com/gfx/mkt/movanoxwbpa/Fund%20flows%20US%20growth%20and%20value%20funds.jpg

Selling continued in U.S. growth funds for the seventh straight week, amounting to $4.5 billion. Value funds also posted an outflow, worth $1.99 billion, after a week’s inflow.

Among sector funds, financials, industrials, materials, and tech lost $1.24 billion, $756 million, $677 million, and $468 million, respectively, in outflows.

GRAPHIC: U.S. equity sector funds https://fingfx.thomsonreuters.com/gfx/mkt/gkvlgkrbapb/Fund%20flows%20US%20equity%20sector%20funds.jpg

Meanwhile, U.S. money market funds booked net selling of about $7 billion in their first weekly outflow in three weeks.