By Chiara Elisei and Dhara Ranasinghe
LONDON (Reuters) – Investors have pulled $300 billion from credit funds this year , unwinding all of last year’s inflows, Bank of America Global Research said in a report Friday.
This is a bearish signal for the corporate debt market, as high inflation and rising interest rates dim the economic outlook, in stark contrast to the inflows into equities.
In its latest Flow of Funds statement, Bank of America said equity funds had inflows into 59 in 300 billion, down from “euphoric inflows” the previous year.
Optimism on credit and equity markets has risen in recent weeks amid growing expectations that inflation is peaking and that the central bank’s aggressive pace of rate hikes may now be slow.
But Bank of America said its bull-bear indicator jumped to 2.0 from 1.4, suggesting that the “buy signal” for risk assets is nearing completion.
No A lot of corporate debt comes due next year, so companies can get some breathing room from higher borrowing costs.
But analysts said the risk that companies would have to refinance their debt would have to be done at higher borrowing rates, implying a cautious approach to high-yielding credit.
“We think there’s a false sense of security in the market right now,” said Seema Shah, chief strategist at asset manager Principal Global Investors.
Bond funds saw outflows worth $2.4 billion in the week ended Wednesday, with high-yield outflows for the first time in six weeks at $
, Bank of America reported. million.
Equity funds suffered 14.$1 billion in outflows, Bank of America said, citing EPFR data, three Biggest exit in month. U.S. stock fund outflows 16.$2 billion, largest since April.
Cash Fund attracted $16. $1 billion inflows and gold funds added $59 million, Bank of America added. Government bonds and US Treasuries saw inflows of $2.3 billion.
In Emerging Markets, Bank of America says bond outflows for 14 weeks, losing $500 million, while equities attracted $1.1 billion in inflows.