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U.S. fixed income fund inflows hit fastest pace since 2020 last week - BofA

Published 06/11/2024, 07:25 AM
© Reuters

Investing.com -- Inflows into U.S. fixed income funds came in at $14 billion last week, the fastest uptick since October 2020, according to analysts at Bank of America Securities.

In a note to clients, the analysts said inflows were most notable in mixed allocation, corporate, and short-term government funds, adding that all of them "saw a meaningful pickup versus the pace observed in recent weeks."

Fixed income funds -- which principally focus on bonds and other debt securities -- added duration last week, the BofA analysts said, in a sign investors were crowding into longer positions as bets increase that the Federal Reserve will leave borrowing costs elevated for an extended period of time.

Fueled by indications of sticky U.S. inflation, markets have been dialing back their expectations for Fed rate cuts this year, weighing on the attractiveness of short-term bonds. However, traders still project that rates will come down eventually, bolstering the projected returns of bonds with longer durations. Bond prices and yields typically have an inverse relationship.

Separately, the BofA analysts said pensions and insurers were among some of the biggest purchasers of U.S. Treasury bonds in the first quarter, a move that they argued was driven by "anticipated Fed cuts as long-end investors looked to take advantage of relatively attractive long-end [Treasury security] rates."

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