Morgan Stanley: Bond Mania Is Now Bigger Than Tech Mania Was During The .Com Bubble

Pets.com sock puppet

Bond yields have come off a touch from their rock-bottom lows seen in recent weeks, but the bottom line is that investors are still hungry for Treasuries, particularly the slightly longer dated ones that still have some yield.

A fresh look at fund flows from Morgan Stanley confirms: investors are allergic to stocks, CRAZY about bonds, and still really into emerging markets.

In fact, says Morgan Stanley, bond fever is bigger than stock market fever was during the .com bubble.

It’s an eye-opening presentation.

Pace of bond inflows now exceeding stock inflows in 2000.

(In Europe it's not quite so much, since government bonds are riskier)

Meanwhile, the rout in US equity funds continues unabated

As the inflows come, the yields collapse.

But extreme flows often indicate market turning points.

At one point, equities and bond markets were of the same size. Now the stock market is down to 40%.

The stock market has also seen major shrinkage compared to Treasuries.

So where are the funds flowing? Well, there's no yield in short rates

Guess what: dividend-based equity indices have actually seen inflows. PEOPLE WANT YIELD.

YIELD

And of course, emerging market funds are still wildly popular.

Some good historical perspective on emerging market love.

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