Easing worries sees investors buy stocks and bonds - BofA

Investors bought bonds and equities in the week to Wednesday, according to BofA Global Research, while the pace of inflows into cash slowed, reflecting a greater sense of confidence.

Treasury funds saw $6.3 billion of inflows in the week, the largest inflow in six weeks, BofA said in a research note citing EPFR data.

Equity funds saw a $2 billion inflow, BofA said, led by tech funds, which saw their largest inflow since December 2021. Financials saw their largest outflow since May 2022.

In a sign investors were becoming less wary about the outlook, the pace of inflows into cash funds slowed, with the four-week average inflow the smallest in 10 weeks, BofA said.

Investors appear at ease about the prospect of a U.S. debt default, as "no-one expects debt ceiling not to be resolved", BofA said, yet there is plenty of angst in rates.

The 1-month Treasury-bill yield (US1MT=TWEB) has surged around 150 basis points this month as the U.S. approaches its 'X-date' - the day which the federal government runs out of money to pay its obligations - which could be as soon as June 1.

"Maybe June risk isn't debt ceiling," BofA analysts said, "but another month of 'rate hike' jobs & inflation data."

U.S. jobs data last week showed a labour market that is still running hot, while consumer price growth eased further but underlying inflation remained strong.

Inflows into gold totalled $1.3 billion, their largest since April last year, BofA said. Gold hit a record above $2,000 an ounce last week, as investors remained wary of the stability of the financial sector.