US bond funds post strong inflows amid rate cut bets Reuters

(Reuters) – U.S. bond funds posted solid inflows in the week to Aug. 28, driven by robust buying of government bond funds, driven by bets on a Federal Reserve rate cut in September and investor caution over geopolitical tensions in Middle east .

US bond funds saw net purchases of $9.58 billion during the week, the largest one-week inflow since July 17, according to LSEG data.

Traders have fully priced in a cut in September, with a 67 percent chance of a 25-basis-point cut and a 33 percent chance of an easing of more than 50 bp, the CME Fed Watch tool showed.

Investors poured $5.42 billion into US government bond funds, booking the biggest weekly net purchase since October 2023.

They raised $4.84 billion in US short/intermediate government funds and Treasuries in the largest weekly net purchase since March 2023. US short/intermediate mutual funds had inflows of 1, 89 billion dollars.

At the same time, money market funds secured their fourth straight weekly inflow of about $10.62 billion.

Meanwhile, US equity funds saw net sales of $2.83 billion during the week, following net purchases of $6.58 billion the previous week.

Investors pulled $1.35 billion out of large-cap funds, partially redeeming $5.33 billion in net buying the previous week. Mid-cap and large-cap funds also lost $798 million and $168 million, respectively, in outflows.

Small-cap funds gained another second weekly inflow, which amounted to $1.03 billion on a net basis.

By sector, investors shed $528 million, $337 million, and $208 million in consumer staples, healthcare, and utilities funds, respectively. The financial sector, meanwhile, gained a third weekly inflow of about $783 million.