Credit fund outflows in 2022 unwind last year's inflows -BofA (updated)

Global Self Storage

02/12/2022 15:01

(Recasts and adds context, comment on credit market)
    By Chiara  Elisei and Dhara Ranasinghe
       LONDON, Dec 2 (Reuters) - Investors have withdrawn $316
billion from credit funds this year, unwinding all of the
previous year's inflows, BofA Global Research said in a note on
Friday. 
    That is a bearish signal for corporate debt markets as high
inflation and rising interest rates darken the economic outlook,
and is in sharp contrast to inflows into share markets. 
    In its latest note on fund flows, BofA said equities funds
had seen inflows of $207 billion in 2022, below the "euphoric
inflows" of the previous year.
    Optimism towards both credit and share markets has risen in
recent weeks as expectations grow that inflation is peaking and
the aggressive pace of central bank rate hikes can now slow. 
    But BofA said its Bull & Bear indicator jumped to 2.0 from
1.4, meaning a "buy signal" for risk assets is close to an end.
    There are no large corporate debt maturities looming next
year, so companies have some breathing space from higher
borrowing costs.
    But analysts said the risk that companies refinancing their
debt would have to do so at much higher borrowing rates meant
the need for a cautious approach to high-yield credits. 
    "We think there is a false sense of security in markets at
the moment," said Seema Shah, chief strategist at asset manager
Principal Global Investors. 
    The BofA note showed that in the week to Wednesday, bond
funds saw outflows worth $2.4 billion, including the first
outflow for high yield bonds in six weeks to the tune of $300
million.  
    Equity funds suffered a $14.1 billion outflow in the largest
exit in three months, BofA said, citing EPFR data. U.S. equity
funds saw a $16.2 billion outflow, the biggest since April. 
    Cash funds attracted $31.1 billion of inflows and gold funds
added $59 million, BofA added. Government bonds and Treasuries
saw a $2.3 billion inflow.
    In emerging markets, BofA said bonds had a 15th week of
outflows, losing $500 million, while equities attracted $1.1
billion of inflows.
 (Reporting by Dhara Ranasinghe and Chiara Elisei
Editing by Karin Strohecker and Mark Potter)
 ((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))