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Its
fund flow report showed investors making for the safety of bond
funds, which have now taken new money for 11 of the past 12
weeks.
Such funds received $2.8 billion over the week while precious
metals - a category which includes gold - took in $1.8 billion,
having received inflows in 18 of the last 19 weeks.
High-grade bonds received $1.5 billion while municipal debt
funds had their 35th week of inflows with $1.3 billion. Money
markets lost $1.2 billion.
The data pertains to a week when a number of Fed speakers
indicated an interest rate hike was back on the agenda after a
raft of relatively strong economic data and minutes from the
last policy meeting released on Wednesday cemented those
expectations.
Markets are pricing in a 32 percent chance of a rate hike in
June, according to the CME FedWatch tool, up from 15 percent on
Tuesday, since when the dollar has soared to six-week highs
against other developed currencies <.DXY>. World stocks are at
two-month lows and U.S. 10-year Treasury yields touched
three-week highs.
Emerging assets have taken a dive too and BAML said emerging
debt funds had seen their first outflows in 13 weeks, shedding
$38 million. Emerging equities lost a far bigger $1.6 billion -
their third straight week of outflows, the data showed.
BAML noted the Fed was potentially turning hawkish at a time
when European, Japanese and Chinese central banks had signaled
no more stimulus was forthcoming in the near future; those
factors, it said, could be setting up a "summer of shocks".
"No profits, no policy stimulus and less bearish positioning ...
we remain risk-cautious, buyers of gold and volatility on dips,"
the bank added.
U.S. equity funds fared the worst, shedding $4.9 billion. BAML
said private clients were selling "ZIRP winners and
strong-dollar plays", a reference to assets that benefited from
near-zero U.S. interest rates.
European equities have now lost money for 15 weeks in a row but
the past week's $1.1 billion outflow was the smallest in six
weeks.
(Reporting by Sujata Rao)
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