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Originally published Saturday, January 4, 2014 at 8:01 PM

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Bond mutual funds hit hard by record withdrawals in 2013

Bond mutual funds in the U.S. saw a record $80 billion in withdrawals in 2013, topping the previous record in 1994, when investors pulled about $62 billion in the full year.

Bloomberg News

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Bond mutual funds in the U.S. posted record investor withdrawals of $80 billion in 2013 as investors fled fixed income in anticipation that interest rates will rise further.

The redemptions, which were through Dec. 23, represented 2.3 percent of bond-fund assets, said Brian Reid, chief economist at the Investment Company Institute (ICI).

The previous annual record for redemptions from bond funds was in 1994, when investors pulled about $62 billion in the full year, or 10 percent of assets, as interest rates rose, according to ICI.

Bond funds had attracted money in the early part of this year until May, when Federal Reserve Chairman Ben Bernanke indicated the central bank might start reducing its monthly asset purchases.

“As long as interest rates are rising we would expect to see continued moderate outflows,” Reid said, adding: “It’s been pretty consistent with what we’ve seen overall.”

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