U.S. bond inflows are set to hit a record this year as investors chasing the highest yields in months pile into cash and bonds, Bloomberg reported Friday (11) , strategists at Bank of America Corp. .
Cash funds attracted $20.5 billion in the week ended Aug. 9, while investors poured $6.9 billion into bonds, strategists led by Michael Hartnett said in a note, citing data from EPFR Global. Meanwhile, US stocks saw their first outflows in three weeks, at $1.6 billion.
Bank of America noted that inflows into U.S. Treasuries have reached $127 billion this year and are on track to hit a new full-year record of $206 billion.
The buoyant demand shows that fixed-income markets remain attractive even as forecasts of higher bond prices and a slowing economy that many predicted last year failed to materialize. The 10-year U.S. Treasury yield was around 4.09% on Friday, up from a low of around 3.25% in April and close to a 15-year high hit last year.
Benchmarks 10-Year U.S. Treasury YieldReturning to the top of the range again (i.e. falling prices) actually provides a bargain entry opportunity for bond investors focused on longer-term value.
As the Federal Reserve continues to push up borrowing costs, investors are also flocking to money market funds, hoping to profit from higher interest rates. The total value of money market funds has climbed to record highs.
Last year, the Fed embarked on one of the most aggressive monetary tightening cycles in decades, inflicting the largest losses on record for bondholders.Meanwhile, stocks have been strong on the back of strong corporate earnings, despiteS&P 500 IndexThe gains have stalled over the past two weeks.
Hartnett said the rising cost of capital this year won’t come down without a severe recession that could hit stocks. The strategist was bearish on U.S. stocks last year, but his negative outlook for 2023 has yet to materialize.
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2023-08-11 19:10:05
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