By Trevor Hunnicutt
NEW YORK (Reuters) - Investors showed an insatiable demand for fixed income during the latest week, handing over the most cash in about seven months to managers of U.S.-based taxable-bond funds, Lipper data showed on Thursday.
The funds gathered $7.5 billion during the week through Feb. 8, marking the sixth straight week of inflows and their strongest sales result since the week that ended July 13, 2016.
Investment-grade bond funds took in $4.9 billion during the week, their largest inflows since October 2014, the data showed. And emerging market debt funds rebounded with their largest inflows since October, $358 million.
"This was a big week," said Pat Keon, senior research analyst for Thomson Reuters Lipper. "It's part of the enthusiasm, positive thoughts. People are willing to take risk."
Analysts for Bank of America Corp (NYSE:BAC) said part of the demand for the funds is foreign buyers taking advantage of lower costs to hold bonds denominated in U.S. dollars while hedging their exposure to greenbacks.
"High grade bond fund/ETF inflows have really accelerated this year and are currently running more or less at the highest pace we have seen historically," the analysts wrote on Wednesday in a note called "Not your father's bond fund inflows."
Inflation-protected bond funds attracted $439 million in their ninth week of inflows, while investors added $855 million to loan-participation funds in their 13th straight positive showing. The categories include bonds designed to boost payouts when consumer prices or interest rates rise, for instance in a period of rapid economic growth.
Normally, rising inflation or interest rates would hurt a bond's value, all else being equal.
U.S. President Donald Trump, who took office last month, and his Republican Party have touted potential new economic stimulus measures, such as tax cuts and infrastructure spending. U.S. stocks have responded by scaling new peaks, while bond returns have been less consistent.
Stock fund flows were mixed in the latest week, with demand for funds invested in domestic stocks posting withdrawals of $99 million, compared to inflows of $12.7 billion the week before.
But stock funds invested internationally took in $2.5 billion in their fifth straight week netting cash, according to Lipper. Emerging markets stock funds attracted $1.3 billion in their best week since August 2016.
"As long as the economy keeps chugging along and things get sorted out in Washington I think we may be ripe for a takeoff," said Keon.