Global bond funds attracted their biggest inflows in more than two years, Bank of America Merrill Lynch (BAML) said on Friday, as the U.K. election and a Gulf political crisis sparked a dash for safe-haven assets.
Investors shoveled $16 billion (£12.5 billion) into bonds in the week to Wednesday, with investment grade bond funds attracting $9.6 billion and high yield bond funds $1.4 billion, according to BAML data.
Together, the $11 billion “monster” inflows are corporate bonds’ highest since February 2015, BAML said. Year to date, inflows to corporate bonds are at $119 billion.
BAML also noted that precious metals enjoyed their largest inflows in 11 weeks at $800 million, and said the shift into safe-haven bonds and gold reflected rising event risk.
The bank’s analysts pointed to the diplomatic crisis in the Middle East, where Qatar has been isolated by its neighbors, and the June 8 British election, which has resulted in a hung parliament.
BAML also highlighted nervousness ahead of former FBI Director James Comey’s testimony to the U.S. Senate Intelligence Committee, which also took place this week.
Comey was fired by President Donald Trump over his handling of the investigation into possible collusion between the Trump election campaign and Russia.
The inflows even extended to low-yielding government bonds and Treasuries, which attracted $600 million, the largest inflows in 19 weeks.
Emerging debt funds pulled in $2.3 billion, their 19th straight week of inflows.
Conversely, equities suffered $1.3 billion of outflows, with $5.4 billion of outflows from mutual funds outweighing $4.1 billion of inflows into equity exchange traded funds.
Once again, it was U.S. equity funds that saw the biggest outflows, with $5.1 billion of redemptions. U.S. stocks have now suffered outflows in six out of the past eight weeks.
European equities, however, attracted $900 million and emerging market equity funds received $1.2 billion.
The latter continues to top BAML’s league table of cross-asset winners, returning 18.6 percent in dollar terms in the year to date. European equities are second, returning 17.2 percent, and gold third with 12.2 percent.