Investors pile in cash, but ‘no equity capitulation’ – BofA

LONDON, March 17 (Reuters) – Investors scooped up cash at the highest weekly rate since April 2020 in the week to March 15, according to BofA Global Research on Friday, amid a tumultuous backdrop of several U.S. bank failures and a rout in global banking stocks.

Cash funds saw a “tremendous” inflow of $112.7 billion in the past week, BofA said, citing EPFR data.

The data includes flows in the days following the collapse of Silicon Valley Bank on Friday. Since then, markets have been shaken, but fears have eased somewhat after a series of lifelines for struggling banks helped restore some investor confidence.

Cash inflows for the first quarter of 2023 are on track to be the highest since the second quarter of 2020, BofA said.

Meanwhile, equity funds saw a “small” weekly outflow of $26 million, and investors pulled $2.3 billion from bonds and put $600 million into gold.

Since the flow data closed on Wednesday, the Swiss National Bank has agreed to offer Credit Suisse ( CSGN.S ) a $54 billion loan to shore up liquidity and restore investor confidence, while U.S. First Republic Bank ( FRC.N ) received a lifeline of 30 billion dollars from a group of large American banks.

The turmoil in the markets has spooked investors, but BofA said equity flows had been unchanged week-on-week and there was “no equity capitulation”.

Still, BofA highlighted in Friday’s report that emergency loans from banks could lead to tighter lending standards, a credit crunch for small businesses and higher unemployment.

There was a “flight to quality” in fixed income, according to BofA, with $9.8 billion pouring into government bonds – the biggest weekly inflow since May 2022. Emerging markets debt recorded its biggest outflow since November, at $3.1 billion .

BofA’s bull and bear indicator – a measure of market sentiment – fell sharply to 3.5 from 4.2 the previous week, the lowest since January, with BofA citing “weaker credit flows and worsening breadth in equities”.

Reporting by Lucy Raitano; Editing by Amanda Cooper and Chizu Nomiyama

Our standards: Thomson Reuters Trust Principles.

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