Bond funds suffer massive outflows amid rate hike concerns

Funds that have invested in domestic bonds have suffered massive cash outflows as investors pulled part of their money out of the funds amid concerns over a rate hike in the US, industry data showed Saturday.

According to the data compiled by industry tracker FNGuide, domestic funds have logged an outflow of some 1.1 trillion won ($945 million) so far this year through Thursday, as concerns over rate hikes in the US have emerged.

Bond yields have been on a steady rise since the second half of last year with the yields on three-year Treasuries surging to 1.801 percent on Thursday, from 1.308 percent at the end of August, which means bond prices tumbled sharply during the cited period.

Bond funds attracted massive amounts of cash from investors in

2016 with their net asset value surging to 101 trillion won in late September from 77.3 trillion won at the end of 2015.

But from the second half of last year and the particularly after Donald Trump was elected as the new US president, such funds have suffered a cash outflow. For the past six months, investors here pulled some 4 trillion won out of the funds, the data showed.

"Amid growing hopes for an economic recovery, risky appetite has increased," said Oh Eun-soo, an analyst at KB Securities. "The trend (of cash outflows) will continue for the time being amid increased inflationary pressure."

The US Federal Reserve is widely expected to raise interest rates next week in the face of sound economic data. (Yonhap)