Risk-averse investors pile into cash at fastest rate since April 2020

LONDON, Oct 7 (Reuters) – Investors piled into cash at the fastest weekly rate since April 2020 in the week to Wednesday, as soaring government borrowing costs, high energy prices and slowing growth fanned risk aversion, BofA Global Research said in a note on Friday.

Investors ploughed USD 88.8 billion into cash, BofA said, citing EPFR data, and sold USD 18.3 billion in bonds – the fastest weekly rate in four months – with the majority of the sell-off comprising investment-grade bonds.

BofA’s “Bull & Bear” indicator, which seeks to track market trends, remained unchanged at the “extreme bearish” level, with this week’s heavy bond outflows cited as the reason.

Investors also shed stocks, with equity funds recording weekly outflows of USD 3.3 billion. US equity outflows resumed, while European equities concluded their 34th week of outflows – the longest streak since 2016.

Emerging market equity funds saw inflows of USD 0.7 billion – the fourth week in a row. Meanwhile investors sold USD 4.4 billion of emerging market debt – the sixth weekly consecutive outflow.

Global stocks have risen this week, with the S&P 500 index .SPX up about 4.4%. European shares were up around 0.2% on Friday ahead of US nonfarm payrolls data due later that could shed light on how much further US rates may rise.

Despite the recent uplift in stocks, BofA analysts remain downbeat, and see risk assets going to new lows in October if the Bank of Japan can’t prevent new highs in dollar-yen and the Bank of England can’t head off new highs in UK gilt yields, they wrote in a note.

(Reporting by Lucy Raitano; Editing by Mark Heinrich and Mark Potter)