Bonds suck in $26 billion, pricing in U.S. Democrats win: BofA

[October 09, 2020] LONDON (Reuters) - Bond funds have seen the second-largest weekly inflows ever of $25.9 billion, BofA said on Friday, as the market continues to price in a Democrats victory in next month's U.S. presidential election, which could mean even more fiscal stimulus.

"Blue wave election outcome (Democrats winning) has curiously flipped from consensus bear to bull catalyst in recent months," the U.S. investment bank said.

Riskier high yield bond funds attracted $5 billion in the week to Oct. 7, the highest in 11 weeks, while government bond funds sucked in $3.8 billion, the largest inflows in 14 weeks.

Equity funds, meanwhile, attracted $4.4 billion, mainly driven by U.S. equities, BofA said, adding it expected the "top" in asset prices to come between U.S. election day on Nov. 3 and the inauguration of the new president in January 2021.

In the fourth quarter, it expects banks, energy and small cap stocks to rally, and 10-year Treasury bond yields to rise to 1%.

The bank also highlighted the likelihood of renewable energy stocks front-running a Democratic victory in presidential and Congressional elections, plus more fiscal stimulus, pointing to one solar energy exchange traded fund's stellar performance.

Invesco solar ETF <TAN.P> has soared 255% from its March lows and gained 42% in the last month alone.

"A 'blue wave' clean sweep which could see Dems in control of the Oval, Senate and House is seeing money pile into renewables", a London-based trader said.

(Reporting by Thyagaraju Adinarayan; Editing by Tommy Wilkes and Mark Potter)

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