LONDON (Reuters) - Investors stampeded into investment-grade and government bond funds, giving fixed income the fourth largest weekly inflows ever, Bank of America Merrill Lynch said on Friday, as investors sought safety from the risk of a global recession.
A total of $16 billion flowed into bond funds in the week to Wednesday, said BAML citing EPFR data. Investment-grade bonds sucked in $10.7 billion, the fifth largest week of inflows to the asset class, while government bonds sucked in $4.7 billion.
High demand for bonds has sent yields to multi-year lows across the developed world, with the U.S. Treasury bond yield curve inverting on Wednesday for the first time since 2007, in a sign of investor concern that the world’s biggest economy might be on the brink of recession.
“Yield curve inversion (is) a ‘cry for help’,” BAML said. “GDP recessions normally follow with a lag but swift policy action can avert recession.”
Equity funds suffered modest outflows of $4.7 billion during the week, the data showed, with $6.8 billion out of mutual funds and $2.1 billion into exchange traded funds.
In another sign that investors were heading for shelter, precious metal funds saw the 11th week of inflows, bringing in $300 million.
Emerging markets were hit by outflows, with $1.1 billion out of debt funds and $3.4 billion leaving equity funds, with the segment seeing outflows in 23 of the past 26 weeks.
Reporting by Tom Arnold; Editing by Alison Williams and Stephen Powell