Daily Management Review

The Worst Bond Market Since 1949, According To Bank Of America


The Worst Bond Market Since 1949, According To Bank Of America
According to a note published on Friday by BofA Global Research, investor sentiment has reached its lowest level since the financial crisis, and global government bond losses are on track to have their worst year since 1949.
The world's most active trades, including bets on the dollar that have driven the dollar to multi-year highs against other currencies and bets on U.S. technology stocks, could be liquidated due to this year's dramatic bond decline, according to the bank.
According to a research note from BofA that cited EPFR data, bond funds experienced outflows of $6.9 billion during the week ending on Wednesday, while equity funds saw withdrawals of $7.8 billion and investors poured $30.3 billion into cash.
According to the note, investor sentiment is at its lowest point since the global financial crisis of 2008.
The US markets seem to be in for another erratic day. As investors worried about the possibility of an economic slowdown and a hit to corporate earnings from the U.S. Federal Reserve's aggressive policy tightening moves to combat inflation, Wall Street futures fell on Friday. The S&P 500 has lost almost 5% this month and is getting close to its bear market lows from mid-June. View More
After reaching their highest level since 2011 on Thursday, Treasury yields—which move counterclockwise to bond prices—were once again on the rise, with the benchmark 10-year yield for the United States recently hovering around 3.76 per cent.
According to BofA, the bond crash "threatens liquidation of (the) world's most crowded trades," such as long positions in the dollar and in American technology.
A bond crash meant that a high in credit spreads and a low in stocks had not yet been reached, according to BofA, which added that investors faced additional inflation, interest rate, and recession shocks.
This week's increase in bond yields was prompted by major central banks' aggressive rate hikes to control inflation, even as growth slows. These rate hikes have unnerved global markets.