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There were $5.6 billion of inflows to long-duration Treasury
funds in the week to Wednesday, the largest on record, while
inflows to short-term Treasuries slowed, according to the
report, which cited EPFR data.
"The biggest flow story right now is money gravitating to extend
duration in Treasuries," BofA said.
The data indicates that fund managers, who expect bonds to
bounce back when the long-awaited recession arrives, have kept
buying, even as prices have dropped, which has pushed up yields.
Long-dated Treasuries have been selling off very heavily in
recent months, and the 10-year U.S. Treasury yield - which moves
inversely to its price - reached a 16-year high of 5.021% this
week.
Analysts point to a range of factors that have weighed on
Treasury prices. These include an increase in supply of
government debt to fund deficits, reinforced by the Federal
Reserve winding down its bloated balance sheet, and growing
uncertainty, which means investors demand higher yields to hold
long duration bonds - the so called term premium.
BofA said the bond bubble has now "popped" but expects prices to
move sideways.
Tech funds also saw inflows of $2.0 billion in the week to
Wednesday, their largest in eight weeks, which BofA attributed
to investors "buying-the-dip", given the sector's recent
declines.
Equities as a whole saw $2.1 billion in outflows, but energy
funds saw inflows of $2.4 billion, the most in 18 months.
Higher oil prices following the outbreak of war in the Middle
East have boosted energy stocks.
(Reporting by Alun John; Editing by Amanda Cooper and Mike
Harrison)
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