Rush to junk bonds gathers pace on Fed's "game-changing" pledge - BofA

Junk-rated bonds saw record inflows of $10.5 billion in the week to Wednesday after the U.S. Federal Reserve's "game-changing" move to expand its corporate bond-buying program to include some speculative-grade debt, BofA said on Friday. Junk bonds have been one of the primary victims of the market fallout following the coronavirus outbreak, but investors have recently been rushing to buy them after the Fed's pledge.

Risk assets across the world rallied in the past few weeks as governments and central banks announced unprecedented stimulus measures to tackle the economic blow from coronavirus lockdowns. Equity funds enjoyed inflows of $10.7 billion, while government bond funds gobbled up $14.1 billion, BofA's weekly fund flows data based on figures from EPFR Global showed. Cash still remained king attracting $52.7 billion.

BofA's sentiment gauge, the Bull & Bear indicator, remained pinned to zero, implying extreme bearishness which usually heralds a big bounce, the bank added.