Return of risk-on fuels worst government debt outflows since October: BAML

January 18, 2019

LONDON (Reuters) – Government bonds suffered the biggest weekly outflows since October last year as investors plowed money into emerging market and high-yield debt, Bank of America Merrill Lynch (BAML) said on Friday.

The bank’s report – which is based on EPFR data and tracks fund flows from Wednesday to Wednesday – said high-yield bond fund enjoyed $2.8 billion of inflows, the biggest since April 2017, while emerging market debt added $2.5 billion. Government bond funds shed $1 billion.

Equity redemptions hit $4.8 billion over the same period, with U.S. stocks haemorrhaging $7.7 billion, BAML researchers wrote in their note to clients. Emerging market stocks saw inflows of $3.4 billion.

BAML’s bull-bear indicator rose to 2.5 from 2.1, moving away from its extreme bearish reading of January 3.

(Reporting by Karin Strohecker, editing by Sujata Rao)