(Bloomberg) — US Treasuries are heading in the right direction for a document yr of inflows as buyers chasing a few of the highest yields in months pile into money and bonds, in keeping with Financial institution of America Corp. strategists.
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Money funds attracted $20.5 billion and buyers poured $6.9 billion into bonds within the week by August 9, strategists led by Michael Hartnett wrote in a notice, citing knowledge from EPFR International. In the meantime, US shares had their first outflow in three weeks at $1.6 billion.
Flows into Treasuries have reached $127 billion this yr, set for an annualized document of $206 billion, BofA mentioned.
The buoyant demand exhibits how alluring fixed-income markets stay even because the bond rally and financial slowdown many have been predicting final yr has didn’t materialize. The yield on 10-year US Treasuries was buying and selling at round 4.09% on Friday, up from a low of round 3.25% in April, and close to a 15-year excessive touched final yr.
“The ten-year benchmark is as soon as once more revisiting the prime quality, presenting a chance for bond buyers targeted on longer-run worth,” mentioned Steven Main, world head of fixed-income analysis at HSBC Plc, in a separate notice.
Buyers are additionally flocking to money-market funds to capitalize on increased charges because the Federal Reserves retains pushing up borrowing prices. The full worth of money-market funds has climbed to an all-time excessive.
The Fed started one of the vital aggressive tightening cycles in a long time final yr, bruising bond holders with a few of the largest losses on document. In the meantime, fairness markets have been robust amid resilient company earnings, although the S&P 500 rally has stalled over the previous two weeks.
Hartnett mentioned the price of capital, which has risen this yr, won’t fall and not using a onerous recession, which in flip could hit shares. The strategist was rightfully bearish final yr however his adverse outlook on shares in 2023 is but to materialize.
–With help from Michael Msika and Sagarika Jaisinghani.
(Updates with context, chart and analyst remark.)
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