Fund managers most overweight on bonds in 15 years: BofA

Bank of America's survey report shows that fund managers are bullish on bonds to the highest degree since the financial crisis, bond overweight position hit a record high since 2009. Most fund managers believe that the Federal Reserve's current round of interest rate hikes has ended, and the probability that the economy can achieve a soft landing next year. In addition, JP Morgan Chase U.S. Treasury customers long ratio rose 4 percentage points, the highest level since November 2010, the highest level.

Bank of America will ask fund managers every month when the Fed's current cycle of interest rate hikes will end, a total of 225 fund managers to participate in the survey, total assets under management of about 553 billion U.S. dollars. The survey showed that fund managers believe that U.S. interest rates have peaked in the belief, a record high since the beginning of the survey. 76% of fund managers believe that the Fed's current round of interest rate hikes has come to an end. 61% believe that interest rates in the next 12 months will be lower than they are now, which has prompted the more conservative investors will be more conservative investors will be reduced to a cash position from 5.5% to 4.7% for a new low in two years.

More than half (54%) expect fixed income to be the best performing asset next year, with 29% forecasting stocks to outperform all other asset classes. Some 94% expected bonds, stocks and commodities to outperform cash. Participants also noted a small overweight to equities – the first time they have done so since April 2022, which is also based on a stable macro outlook and much more optimistic view on rates. Going long large-cap technology is the most “overcrowded” trade, along with shorting Chinese stocks, according to the report.
Investors bought tech stocks at the fastest pace since May 2023 last month and are now at their most overweight since November 2021, eschewing banks, which went from a net 2% underweight to 10% underweight.

However, there are some investors who are not optimistic about the prospects for a rebound in U.S. bonds.Michael de Pass, head of global interest rate trading at Citadel Securities, said the U.S. bond market is still very data-dependent, so the market's optimism could change.