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Investors Heading for Hills, Ditching Risk for Cash and Bonds


Macroeconomic mayhem has the money flowing to safety.

MINYANVILLE ORIGINAL Spain's not-so-slow-motion trainwreck, the possibility of a Greek exit from the eurozone, and flagging economic data from the United States and China is spooking investors out of risky assets and into safer assets with little yield.

We have seen how US Treasury yields rallied with each awful economic indicator last week while the Dow (^DJI) and Nasdaq (^IXIC) dropped over 3%. Germany started selling short-term debt for negative yield. Meanwhile, bond funds took in $1.5 billion last week.

EPFR, an organization that tracks fund flows, showed that there was a $6.2 billion net inflow into equities funds, driven by US inflows, half of which went into an S&P 500 (SPY) index fund. $2.2 billion flowed into money market funds. Here again, US gains offset record European outflows. Investors redeemed $7.6 billion from European money market funds last week.

"Redemptions still haven't hit the levels seen last August," said EPFR Global Research Director Cameron Brandt. "That may be due in part to the fact that flows are currently dominated by institutional investors. The retail investors who fled during 3Q11 have stayed away."

Emerging markets funds were particularly hard hit as China equity funds had their worst week of outflows this year.

Twitter: @vincent_trivett
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