Investors are piling back into bonds as recession replaces inflation as markets’ main fear, and fixed income proves its worth as a hedge against the recent stock market chaos.
US Treasuries and other highly rated debt staged a powerful rally during last week’s equity rout, pulling yields to their lowest level in more than a year. While the sharpest moves subsequently reversed, fund managers say they underscored the appeal of bonds in an environment where growth is slowing, inflation is falling, and the Federal Reserve — along with other major central banks — is expected to deliver multiple cuts in interest rates by the end of the year.
Investors have poured $8.9bn into US government and corporate bond funds in August, building on inflows of $57.4bn in July, which marked the highest monthly figure since January and the second-biggest since mid-2021, according to flow tracker EPFR. High-grade corporate debt has seen 10 weeks of positive flows, the longest streak in four years.