By Olga Cotaga
LONDON (Reuters) – Investors pumped money into cash, investment grade bonds and gold, but pulled money out of equities, BofA’s weekly fund flow statistics showed on Friday, signalling a move away from high-risk assets.
Money managers have allocated $40.9 billion to cash, the largest inflow since May 6, and $24.5 billion into bond funds, third largest inflow ever, Bank of America said.
Investors pumped $3.8 billion into gold, the second largest inflow into the commodity ever. But there were $3.8 billion in redemptions from equities.
The investment bank noted two big themes emerging in the financial markets – a great repression in interest rates and a great debasement of the U.S. dollar, which it said should incite rotation from deflation to inflation.
The bank said $8 trillion of monetary stimulus via central bank asset purchases in 2020 had crushed interest rates, corporate bond spreads and volatility.
Central banks’ bond-buying programmes across developed markets have pushed the ICE BofA MOVE index that tracks expected volatility in the U.S. Treasury market to 43, close to a record low, after the index rose above 160, its highest level in more than a decade, four months ago. <.MOVE>
“Interest rate repression means investors can’t hedge the inflationary risks … crowding into ‘short U.S. dollar’, ‘long gold’ hedges,” the investment bank said.
(Reporting by Olga Cotaga; Editing by Elizabeth Howcroft and Jane Merriman)
