NEW YORK (Reuters) - Funds invested in high-yield U.S. corporate bonds attracted $1.5 billion in fresh capital in the week to June 8, the first such inflow in seven weeks, according to data provider EPFR, as expectations for a U.S. interest-rate increase later this month dropped dramatically.
"I think basically the pendulum has swung back to buying junk bonds because investors are not expecting a rate hike from the Federal Reserve in June," said Cameron Brandt, director of research at EPFR.
The latest U.S. employment report released earlier this month showed the slowest growth in more than 5-1/2 years, dampening expectations that the Federal Reserve would raise interest rates in June. Fed Chair Janet Yellen said a few weeks ago that she expected the Fed to raise its benchmark interest rate "in the coming months."
But she omitted those words from a Monday speech, suggesting that the weak May jobs report may cause the Fed to reconsider.
"People got very alarmed when the April minutes were released," Brandt said, referring to the minutes from the Fed's previous policy meeting, which were seen as containing hints about a June rate increase.
Flows into high-grade U.S. bond funds and global debt portfolios also accelerated in the past week, the EPFR data showed. Investors added just over $8 billion overall to global bond funds, Brandt said. That included $2.3 billion of inflows to U.S. investment-grade corporate bond funds, their 11th consecutive week of fresh capital, Brandt added.