Bank of America: Investors sell stocks, buy bonds; shun emerging markets

LONDON, Oct 13 (Reuters) – Investors sold stocks and bought bonds in the week to Wednesday, Bank of America Global Research said in a note on Friday, while investors continued to shun emerging market assets.

Equities had a weekly outflow of $8.2 billion, BofA said, citing EPFR data, while investors favoured the relative safety of bonds, which had inflows of $3.7 billion.

Inflows into Treasuries totalled $7.2 billion, the largest weekly inflow since March 2023, BofA said.

Investors dumped emerging market debt and stocks in the latest week, with outflows from equities at $4.3 billion, their largest weekly outflow since May 2022, BofA said.

BofA investment strategist Michael Hartnett said a 5% yield in the U.S. 10-year and 4,200 in the S&P 500 (.SPX) are “critical levels”.

Hartnett said if Treasuries stay below 5%, the SPX can stay above 4.2k in near-term given bearish sentiment.

The U.S. 10-year yield reached a 16-year high of 4.887% a week ago after strong U.S. jobs data, but reversed course this week as investors flocked to safe-haven assets, such as U.S. government bonds, after conflict escalated in the Middle East.

The 10-year yield was last at 4.6248%.

Meanwhile, BofA’s Bull & Bear indicator dropped to 2.2 from 2.6 – its lowest level since April – on “poor equity breadth, outflows from HY/EM bond and DM equities”.

A reading below 2 represents a “contrarian buy” signal, BofA said.

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