U.S. money market funds draw inflows for fifth straight week

(Reuters) - U.S. money market funds received inflows for a fifth straight week after recent data pointed to a still-strong labor market, bolstering bets for a rate hike by the Federal Reserve in May.

According to Refinitiv Lipper data, U.S. money market funds drew a net $20.51 billion worth of inflows in the week to April 12. It was, however, the smallest weekly net purchase since March 8.

GRAPHIC: Fund flows: U.S. domiciled equities, bonds and money market funds https://www.reuters.com/graphics/USA-FLOWS/USA-FLOWS/lgvdkxleapo/chart.png

Investors are favoring money market funds over bank deposits amid a rally in short-term interest rates, with the real interest rate turning positive by some measures, analysts said.

The yield on the 3-month U.S. Treasury bill, in which money market funds invest the most, surged to a near 16-year high of 5.175% on Thursday.

Meanwhile, equity funds saw outflows dropping to a three-week low of $1.09 billion.

U.S. small-cap equity funds obtained $490.3 million worth of inflows after facing three weekly outflows in a row, but large-, and mid-cap funds recorded $919 million and $276 million worth of withdrawals, respectively.

Investors purchased U.S. communication services and financial sector funds of $951 million and $661 million, respectively, while selling $658 million worth of healthcare funds.

GRAPHIC: Fund flows: U.S. equity sector funds https://www.reuters.com/graphics/USA-FUNDS/USA-FUNDS/gkplwjxzyvb/chart.png

Meanwhile, U.S. bond funds obtained $1.7 billion worth of inflows when compared with $8.97 billion worth of net buying in the previous week.

U.S. government bond funds received $2.44 billion worth of inflows, the smallest amount in eight weeks, while loan participation, and U.S. short and intermediate investment-grade funds saw outflows of $542 million and $264 million, respectively.

GRAPHIC: Fund flows: U.S. bond funds https://www.reuters.com/graphics/USA-FUNDS/USA-FUNDS/akpeqnalapr/chart.png

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Devika Syamnath)