Global bond funds see hefty inflows on expectations of rate cut

(Reuters) - Global debt funds attracted inflows for a 29th straight week in the seven days to July 10 on expectations of a Federal Reserve rate cut amid weakening labour market conditions and easing inflation levels.

According to LSEG data, global bond funds drew a net $9.75 billion worth of inflows during the week after about $12.28 billion worth of net purchase in the prior week.

A closely watched U.S. labor market report last week indicated that the unemployment rate rose to a 2-1/2 year high of 4.1% in June, heightening market expectations of a Federal Reserve interest rate cut.

This expectation was further supported by an inflation report this week, which showed U.S. consumer prices fell by 0.1% in June, reinforcing a disinflationary trend. Consequently, the benchmark 10-year Treasury yields dropped to a four-month low of 4.168% on Thursday.

By region, U.S. bond funds led the way, securing about $3.77 billion in a sixth consecutive week of net buying. European and Asian funds, meanwhile, attracted about $3.22 billion and $1.53 billion, respectively.

Investors bought $1.97 billion worth of government bond funds, logging net inflows for a 11th week. Corporate, and loan participation funds received $1.09 billion and $448 million, respectively in net purchases.

Global equity funds experienced a third successive week of inflows, although at just $114 million, compared with $16.45 billion worth of net purchases in the prior week.

Investors ditched a notable $1.18 billion and $354 million worth of healthcare and financial sector funds, while the tech sector still drew approximately $1.22 billion, a fifth weekly inflow in a row.

Simultaneously, investors parked a net $34.16 billion in global money market funds, posting a second weekly inflow in a row.

In the commodities segment, precious metals funds saw first weekly outflow in three, valuing $155.9 million on a net basis. Conversely, investors poured $106.8 million in energy funds, snapping a four-week selling streak.

Data covering 29,498 emerging market funds showed that bond funds gained a significant $1.58 billion in inflows, the largest amount in five weeks. Equity funds, meanwhile, saw outflows easing to a four-week low of $247 million.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; editing by David Evans)