Investors on track to pour $1.3 trillion into cash funds in 2023 - BofA (updated)

Global Self Storage

03/11/2023 11:30

(Adds details of report and market context)
    By Harry  Robertson
       LONDON, Nov 3 (Reuters) - 
    Investors are on track to have put $1.3 trillion into cash
funds in 2023, according to Bank of America and data provider
EPFR.
  
        BoFA's weekly Flow Shows report said that investors put
$64.2 billion into cash funds in the week to Wednesday. They
pulled $3.4 billion from equity funds across the week, while
putting $4.5 billion into bonds.
  
    Bond fund managers are attracting inflows after a brutal
three years, with many investors hoping that interest rates have
now peaked and that yields can fall from here.
        Yet they are competing with money market funds, which
invest in highly liquid short-term debt products, such as those
issued by governments or highly rated companies.
  
        Central banks have raised short-term rates to their
highest levels in more than a decade to tame inflation, making
yields on money market funds attractive.
  
    BofA's data stretches to Wednesday, meaning it fails to
fully capture the powerful market rally that started that day
and continued on Thursday after the Federal Reserve and Bank of
England held interest rates steady for the second meeting in a
row, boosting stocks and bonds.
        The bank said investors had put money into bonds for
four straight weeks. In the week to Wednesday they preferred
U.S. shorter-dated bond funds, with $5.2 billion of inflows.
  
        European stocks have been particularly out of favour,
with outflows for the past 34 weeks, including $1 billion most
recently.
  
        So far this year, U.S. stocks have massively
outperformed Europe. The benchmark U.S. S&P 500 stock index
 .SPX  is up around 13% for the year, compared with a 3% rise
for Europe's STOXX 600  .STOXX .
  
        The yield on the 10-year U.S. Treasury  US10YT=RR ,
which underpins the global financial system, rose to a 16-year
high above 5% last week but has since dropped around 35 basis
points. Yields move inversely to prices.
  
        BofA said its Bull & Bear indicator of investor
sentiment was at 1.4, the lowest since November 2022. Yet the
bank said that was a "contrarian buy signal", given that
sentiment could well improve from depressed levels.
  

 (Reporting by Harry Robertson, editing by Alun John and Louise
Heavens)
 ((harry.robertson@thomsonreuters.com;))