Investors Liquidate Everything in Record $137 Billion Cash Haul

(Bloomberg) --

Investors made their biggest dash for cash in history over the week that broke the bull market.

They channeled $137 billion into cash-like assets and a record $14 billion into government bonds in the five days through March 11, according to Bank of America Corp. research citing EPFR Global data. Gold got its second-biggest inflow ever at $3 billion.

As the coronavirus outbreak is met with policy impotence from Europe to America, money managers are liquidating en masse. The losers include investment-grade and high-yield bonds and those of developing nations. Even before Black Thursday, investors yanked an unprecedented $34 billion out of these risk assets in total in the week through Wednesday.

In a dysfunctional market, the return of capital over the return on capital is the investor mantra.

Investors Liquidate Everything in Record $137 Billion Cash Haul

“Everybody just wants to hold perceived safe havens,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. “There’s certainly a flight out of risky assets, which includes the universe of emerging-market assets across the equities and FX space, and the flight hasn’t ended.”

Whether the record exodus signals a positioning cleanout from here is anyone’s guess with a growing number of businesses and consumers in lockdown across the developed world.

Yet Bank of America strategists said the Federal Reserve’s latest bazooka, in the form of $5 trillion of liquidity to shore up the economy, offers hope.

“QE5 promises massive market liquidity, sets up a big market rebound if a credit crunch is averted and fiscal policy short-circuits recession,” they wrote in a note to clients.

The historic outflows from the BofA report:
1. Biggest IG + HY + EM debt outflow ever ($34.1bn)
2. Biggest cash inflow ever ($136.9bn)
3. Biggest government bond inflow ever ($13.9bn)
4. Biggest financial sector outflow ever ($3.3bn)
5. Second-biggest inflow to gold ever ($3.1bn)

©2020 Bloomberg L.P.

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