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Bond selloff risks liquidation of world’s most crowded trades- BofA By Reuters

© Reuters. FILE PHOTO: A Bank of America logo is pictured in the Manhattan borough of New York City, New York, U.S., January 30, 2019. REUTERS/Carlo Allegri

LONDON (Reuters) – Global government bond losses are on course for the worst year since 1949, and this year’s bond crash threatens credit events and a liquidation of the world’s most crowded trades, BofA said in a note on Friday.

Bond funds recorded outflows of $6.9 billion during the week to Wednesday, while $7.8 bln was removed from equity funds and investors ploughed $30.3 bln into cash, BofA said in a research note citing EPFR data.

BofA added that investors face more inflation, interest rates and recession shocks, adding that a bond crash meant that a high in credit spreads and low in stocks has not yet been reached.

Investor sentiment is the worst it has been since the 2008 global financial crash, the note said.

Aggressive rate hikes from major central banks to contain inflation, even as growth slows, has unnerved world markets and sparked a fresh surge in bond yields this week.

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