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Traders May “Sell The Inauguration” But BofA Is Not Calling For “A Big Short” Yet

Sunday, January 8, 2017 11:18
% of readers think this story is Fact. Add your two cents. / by Tyler Durden / Jan 8, 2017

Along with most of his Wall Street peers, BofA’s Chief Investment Strategist Michael Hartnett flipped his outlook on risk assets shortly after the election, turning from quietly bearish to vocally bullish and forecasting a substantial rise in US equities, and even more substantial bounce for Japanese, European and UK stocks as well as oil.

So far, Hartnett has been correct, and according to recent fund flows, much of the investing community agrees.

Some specifics: in the last week, according to EPFR, there were both strong bond inflows ($6.3bn) as well as equity inflows ($5.5bn) offset by modest commodity outflows ($0.2bn). Curiously, unlike in the earlier part of the reflation trade when buying of equities was funding from bond liquidations, last week we saw the strongest week of bond inflows in 3 months, which followed $41.5bn of redemptions in past 8-weeks – the largest redemptions since taper tantrum.

A more nuanced look into bond flows shows that investors added risk, with another week of redemptions from Treasuries but 1st inflows to EM debt funds in 9 weeks, 2nd week of renewed inflows to IG bond funds, and 6th consecutive week of inflows to HY bond funds. In other words, “risk proxies” in the bond world are getting hot again.

Perhaps nowhere is this more obvious than what is going on in the primary issuance market. Here, as Bloomberg notes, debt sales are blowing through all records, with the biggest volumes of issuance ever for the first week of January, as top-rated U.S. companies are selling bonds at the fastest pace ever to start a year


The post Traders May “Sell The Inauguration” But BofA Is Not Calling For “A Big Short” Yet appeared first on Silver For The People.


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