Investors pour money into cash, bonds and gold, weekly BofA data shows

By Olga Cotaga

LONDON (Reuters) – Investors pumped money into cash, investment grade bonds and gold, but pulled money out of equities, BofA’s weekly fund flow statistics showed on Friday, signalling a move away from high-risk assets.

Money managers have allocated $40.9 billion to cash, the largest inflow since May 6, and $24.5 billion into bond funds, third largest inflow ever, Bank of America (NYSE:BAC) said.

Investors pumped $3.8 billion into gold, the second largest inflow into the commodity ever. But there were $3.8 billion in redemptions from equities.

The investment bank noted two big themes emerging in the financial markets – a great repression in interest rates and a great debasement of the U.S. dollar, which it said should incite rotation from deflation to inflation.

The bank said $8 trillion of monetary stimulus via central bank asset purchases in 2020 had crushed interest rates, corporate bond spreads and volatility.

Central banks’ bond-buying programmes across developed markets have pushed the ICE (NYSE:ICE) BofA MOVE index that tracks expected volatility in the U.S. Treasury market to 43, close to a record low, after the index rose above 160, its highest level in more than a decade, four months ago. (MOVE)

“Interest rate repression means investors can’t hedge the inflationary risks … crowding into ‘short U.S. dollar’, ‘long gold’ hedges,” the investment bank said.