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