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Investors cool on bonds

By Sheyna Steiner · Bankrate.com
Tuesday, July 2, 2013
Posted: 3 pm ET

People feel much more comfortable about investing in stocks than they did this time last year, according to a new survey from John Hancock Investments. Many more people -- 62 percent of those surveyed -- say that now is a good time to invest in stocks than did one year ago, when only 48 percent thought investing in stocks was a good idea.

Fewer people think now is a good time to invest in bonds than did last year -- 23 percent in 2013 to 27 percent in 2012. It could be a good time to turn against bonds: Treasury yields have surged since May, when Federal Reserve Chairman Ben Bernanke began to discuss the eventual end of the stimulative quantitative easing program. The 10-year Treasury note gained more than half a percentage point between May 20 and July 1; it's now at 2.5 percent. Bond prices move in the opposite direction as yield, which means bondholders and bond fund investors may have seen the value of their investments dip in recent weeks.

As a result, some people are getting out of bonds. Bond mutual funds experienced the largest outflows ever last week, totaling $23.3 billion, the website Business Insider reported on Friday.  Last week is the fourth week in a row that bond funds have posted negative flows, according to Investment Company Institute, or ICI, statistics. ICI is the trade association for the mutual fund industry.

Have you changed your allocation to bonds this year?

Follow me on Twitter: @SheynaSteiner.

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Senior investing reporter Sheyna Steiner is a co-author of "Future Millionaires' Guidebook," an e-book written by Bankrate editors and reporters. It's available at all the major e-book retailers.

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