By Sam Forgione
NEW YORK (Reuters) - Investors worldwide poured $12.4 billion into stock funds in the latest week, extending record inflows into the funds this year to $231 billion, data from a Bank of America Merrill Lynch Global Research report showed Friday.
The inflows into stock funds in the week ended October 30 marked the third straight week of investors seeking more risk in stocks, data from the report showed. The report also cited data from fund-tracker EPFR Global.
The $231 billion inflows into stock funds this year, which are the most since records began in 2002, have dwarfed the previous record inflow of $69 billion in 2010, according to Bank of America Merrill Lynch. The surge also trounced last year's inflows of $36 billion.
The latest demand for stock funds came on expectations that the U.S. Federal Reserve would stick to its current bond-buying program at its October meeting. The central bank extended its $85 billion in monthly bond-buying on Wednesday.
The Fed's easy money policies have helped boost U.S. stock indexes this year to record highs. The stimulus has suppressed bond yields and driven demand for riskier assets such as stocks. The Standard & Poor's 500 index has surged over 23 percent this year.
Demand this year has plummeted for bond funds, however, which have attracted just $16 billion in new money after reaping record inflows of $265 billion last year, according to Bank of America Merrill Lynch.
Starting in May, fears that the Fed would scale back its monthly bond buying triggered a bond market selloff that ultimately pushed the yield on the benchmark 10-year U.S. Treasury note above 3 percent in September from 1.62 percent in early May.
Funds that hold U.S. stocks attracted the biggest inflows in the latest week at $7.6 billion, with much of that new cash flowing into exchange-traded funds, the data showed. The S&P 500 rose 1 percent over the reporting period.
European stock funds also raked in $2.3 billion in new cash and marked their 18th straight week of inflows. Japanese stock funds attracted $900 million in new cash, marking their 8th straight week of new cash even as Japan's Nikkei average suffered its biggest one-day loss in 2-1/2 months on October 25, hit by the yen's strength against the dollar.
Investors pulled $600 million out of emerging market stock funds, however, marking the first outflows from the funds in four weeks even as MSCI's emerging market equities index rose 0.9 percent over the weekly reporting period.
Money market funds pulled in $3.2 billion in new cash, down from huge inflows of $66 billion the prior week, according to Bank of America Merrill Lynch.
That surge, the third-largest net inflow on record, came after fears of a U.S. debt default faded. Money market funds would have been hit by a default since they typically hold short-dated U.S. government debt.
Bond funds, meanwhile, had outflows of $3.7 billion over the week, reversing the prior week's modest inflows and marking outflows in 12 of the past 14 weeks.
Investors pulled $1.1 billion out of funds that hold government debt, mainly U.S. Treasuries, marking their eighth straight week of outflows.
The yield on the safe-haven 10-year Treasury note rose about 4 basis points to 2.53 percent after hitting three-month lows the prior week. Bond yields move inversely to their prices.
Investors also yanked $600 million out of emerging market debt funds, marking their fifth straight week of withdrawals, despite expectations of continued Fed easing. The Fed's stimulus has boosted demand for emerging market assets.
Investors again showed risk appetite by pouring $1.6 billion into high-yield junk bond funds, however, marking their eighth straight week of new cash.
Investment-grade bond funds, meanwhile, had $3.3 billion in outflows, their largest in 18 weeks, with most of the outflows stemming from a single mutual fund, according to Bank of America Merrill Lynch.
Investors also committed $700 million to funds that hold floating-rate bank loans, marking 71 straight weeks of new cash into the funds.
Concerns that the Fed will eventually cut back its stimulus have driven demand for bank loan funds, which are protected from rising interest rates by being pegged to floating-rate benchmarks.
Funds that hold precious metals, meanwhile, had $400 million in outflows in the latest week, marking their 7th straight week of withdrawals. The price of spot gold flattened late in the week. Gold was up less than 0.1 percent at $1,344.56 an ounce at the close of trading on October 30.
(Reporting by Sam Forgione; Editing by W Simon and Krista Hughes)