LONDON (Reuters) – Investors have flocked to U.S. Treasuries and pumped money into cash and bank loans since the start of the year as global markets braced for interest rates higher, BofA weekly statistics showed on Friday.

“The rate shock in 2022 will follow the inflation shock of 2021 and financial conditions will tighten sharply,” analysts led by Michael Hartnett, chief investment strategist at the investment bank said in a note. American.

The minutes of the US Federal Reserve’s policy meeting last December showed that policymakers are paving the way for a faster trajectory of interest rate hikes. Money markets in the US and UK expect rate hikes as early as March.

BOFA strategists calculated that global central banks bought $ 26 billion in assets every trading day in the pandemic era, increasing global market capitalization by $ 133 billion per day.

On a cumulative basis, investors also injected a record $ 949 billion in equity inflows in 2021, more than the cumulative inflows of the past two decades.

On a weekly basis, a $ 2 billion outflow from US Treasuries was the largest in a year, energy stocks posted large inflows, while European stocks registered their first inflows in eight weeks.

Liquidity levels were also increasing, although there was no sense of risk aversion in equity flows yet. BofA’s “private clients”, which manage $ 3.3 trillion in assets, had 11.2% cash, the highest since last April, and last week saw the largest inflow since July 2020 , added BofA’s note.

(Reporting by Saikat Chatterjee; editing by Marc Jones)

About The Author

Related Posts