April 24, 2020 / 8:15 AM / a month ago

Investors grab junk bonds, cash still king

LONDON (Reuters) - Investors added onto junk-rated bond funds as the new consensus in markets was to “buy what the Fed buys”, BofA’s note on fund flows showed on Friday.

In otherwise a risk-averse week, investors piled $126.4 billion into cash, dumping emerging market equities.

Junk-rated bond funds attracted $4.3 billion in the week to Wednesday as the U.S. Federal Reserve’s pledge buy some speculative-grade debt helped sentiment.

Following the Fed, the European Central Bank said on Wednesday it would be willing to lend against some assets rated below investment-grade, raising hopes that the bank could eventually start outright purchases of weaker credits.

Equity funds saw $7.3 billion in outflows for the week to Wednesday, the BofA data showed. Emerging market equity funds saw $7.4 billion in outflows.

Only healthcare and technology stocks globally were resilient to the ongoing virus shock, with investors pumping a combined $4.9 billion into those sectors.

The U.S. bank said healthcare and technology stocks now made up 42% of the global equity market, a meteoric rise from just 24% in 2006. It came at the cost of energy and financial stocks dropping to 18% from 36% over the same period.

Reporting by Thyagaraju Adinarayan; Editing by Tom Wilson and Angus MacSwan

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