By Yoruk Bahceli and Thyagaraju Adinarayan
LONDON (Reuters) - Junk-rated bonds saw record inflows of $10.5 billion in the week to Wednesday after the U.S. Federal Reserve's "game-changing" move to expand its corporate bond-buying programme to include some speculative-grade debt, BofA said on Friday.
Junk bonds have been one of the primary victims of the coronavirus outbreak, with returns on U.S. high-yield bonds falling to their lowest since 2008 in March. The Fed's decision last Thursday set off a rush back into junk bonds for investors, who had already started to throw record amounts into the market.
That has helped accelerate bond sales from junk-rated companies, with borrowers raising nearly $10 billion of debt this week in the United States, up more than 60% from the previous week, according to Refinitiv IFR data.
Although the European Central Bank does not purchase junk debt, the turnaround in sentiment also helped the European high-yield market to open for issuance after a two-month break with a bond sale from Swedish alarms company Verisure on Thursday.
Risk assets across the world rallied in the past few weeks as governments and central banks announced unprecedented stimulus measures to ward off the economic blow from coronavirus lockdowns.
Equity funds enjoyed inflows of $10.7 billion, while government bond funds got $14.1 billion, according to BofA's weekly fund flows datam based on figures from EPFR Global. Cash remained king, attracting $52.7 billion.
BofA's sentiment gauge, the Bull & Bear indicator, remained pinned to zero, implying extreme bearishness, which usually heralds a big bounce, the bank added.