Money-market funds were reportedly moving out of Treasury bills of certain maturities in the weeks leading up to the deal Congress struck Wednesday to raise the debt ceiling and avert a potential default.
Meanwhile, as the latest fund flow data for the week ended October 18 show, investors were moving out of money-market funds in a big way.
The asset class got hit with $US70 billion in redemptions this week, an outflow of equal magnitude to that during the debt ceiling crisis of August 2011.
“But unlike 2011, the ‘flight-to-quality’ this time is to stocks ($17bn inflows) rather than bonds ($3bn outflows),” writes BofA Merrill Lynch chief investment strategist Michael Hartnett. “Corporations are safer than countries.”
Below, is a complete breakdown of this week’s flows from Hartnett.
Asset Class Flows
Equities: $17.2bn inflows ($14.6bn via ETFs)
Bonds: $3.3bn outflows (3 straight weeks)
MMF: outsized $US70bn outflows (same size as Aug’11 outflows)
Precious metals: $1.1 outflows (largest outflows in 14 weeks)
US: $10.6bn inflows (all via ETFs – SPY, IWM) (breaks 3-week outflow streak)
Europe: 3rd largest weekly inflows on record ($3.4bn) (16 straight weeks)
EM: $0.9bn inflows (inflows in 5 out of past 6 weeks)
Japan: $0.6bn inflows (6 straight weeks)
Fixed Income Flows
69 straight weeks of inflows to floating-rate debt ($0.6bn)
6th straight week of inflows to HY bond funds ($1.7bn)
6th straight week of redemptions from govt/tsy funds ($0.9bn)
$2.0bn outflows from IG bond funds
$0.5bn outflows from EM debt funds (3 straight weeks)
27 straight weeks of outflows from TIPS ($0.2bn)
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