Bond Funds See Huge Spike in Inflows

NEW YORK (TheStreet) -- Investors were putting money to work in mutual funds again last week, and bonds were the where they were doing it.

According to the latest data from the Investment Company Institute, long-term mutual funds investing in bonds took in a whopping $4.86 billion in the week ended Sept. 7.

That compares to outflows of $111 million in the previous week.

Overall, the firm estimated positive inflows of $7.31 billion for the week, a pretty big shift following inflows of just $789 million in the prior week, and outflows of $2.35 billion, $554 million, and $40.25 billion in the weeks ended Aug. 24, Aug. 17, and Aug. 10, respectively, as volatility gripped the markets and sent stocks tumbling more than 10% from their 2011 highs.

The yield on the 10-year U.S. Treasury bond went below 2% last week, visiting levels unseen in six decades, and it settled down 1/32 on Wednesday with the yield right at 1.99%.

The majority of the outflows in the past month have unsurprisingly been from domestic equity funds, and it was more of the same last week as that class of fund was the only one to see leakage. Long-term mutual funds investing in U.S. equities saw outflows of $1.13 billion, contrasting with inflows of $1.84 billion for funds buying foreign equities and $1.74 billion for hybrid funds investing in a mix of equities and fixed-income securities. All told, equity funds only saw inflows of $712 million last week.

Municipal bonds weren't feeling much love from investors though with ICI estimating inflows at a measly $424 million vs. $4.44 billion that poured into taxable bonds.

ICI says its estimates are based on "data collected covering more than 95 percent of industry assets and are adjusted to represent industry totals."

Stocks are on the rebound so far this week, however, with the Dow Jones Industrial Average rising in all three sessions, including a 1.3% jump on Wednesday amid hopes that Europe's policymakers will be able to find a solution to keep Greece out of default.

Twenty-eight of the blue-chip index's 30 components finished higher, led by American Express(AXP), General Electric(GE), Home Depot(HD), IBM(IBM), 3M(MMM), and Walt Disney(DIS), which all rose more than 2% on the day.

--Written by Michael Baron in New York.

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