Bond Bubble? BofA Reports Bond Inflow May be Dangerously High

• Bank of America (BofA) recently reported a surge in bond and cash reserves due to investors’ worries about a potential recession.
• Ryan Payne from Payne Capital Management (PCM) noted that the rise in bond inflows is a sign of a forming bubble.
• 289 fund managers participating in BofA’s survey are pessimistic about economic growth, but still hopeful for a soft landing.

Rise of Bond Allocations

Bank of America (BofA) recently released its May Global Fund Manager Survey, which revealed that investors have been increasingly putting their funds into bonds and cash reserves instead of stocks due to worries about a possible recession. The report found that the allocation into bonds has grown to 14% from 10% the month before, constituting the highest level in the past 14 years. Bonds are debt securities issued by governments, municipalities, or corporations to raise funds from investors willing to lend them money for some time.

Dangerous Place to Invest?

Fed Chair Jerome Powell has been raising interest rates up to 5% in 10 consecutive revisions since Q2 2022, with the latest hike in Q1 2023. This hawkish policy prompted Ryan Payne, President of Payne Capital Management (PCM), to call the bond market a “dangerous place to be” at the moment as one-quarter of all bond inflows over the past ten years happened within just ten months — potentially signaling an upcoming bubble.

Fund Managers Remain Hopeful

The BofA survey also showed that managers remain somewhat optimistic despite their pessimism towards global growth — with 63% expecting there will be a soft landing following any period of decline. A total of 289 fund managers participated in this survey who jointly manage $735 billion worth of assets.

What is a Soft Landing?

A soft landing refers to an economic situation where growth slows down moderately after an extended period rather than plummeting suddenly and drastically — avoiding any severe downturn or recession that could lead into negative territory. It’s typically used when discussing financial bubbles and other destabilizing events on markets and economies around the world.


While investors are becoming increasingly wary about economic conditions due to rising interest rates and potential bubbles forming on certain markets — such as bonds — fund managers remain hopeful for an eventual soft landing should a recession occurr.

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