Global funds raise cash to 16-month highs, cut bonds: Reuters poll

Fri Oct 28, 2016 7:05am EDT
 
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By Claire Milhench

LONDON (Reuters) - Global investors raised their cash levels to 16-month highs in October at the expense of bonds, reflecting a turbulent month in debt markets beset by fears the multi-decade bond bull run was coming to an end, a Reuters monthly poll showed on Friday.

A sell-off in UK gilts, U.S. and European government bonds in October encouraged global funds to pare back their bond holdings to 39.9 percent of their balanced portfolios, the lowest level since June, and raise cash to 6.6 percent, the highest since June 2015.

With the U.S. Federal Reserve expected to raise rates in December, some cash deposit rates now look attractive relative to bonds, with three-month Libor USD3MFSR= rising since late June to seven-year highs.

The poll of 58 fund managers and chief investment officers in the United States, Europe, Britain and Japan was carried out between Oct. 14 and 26.

During this period investors became increasingly focused on when central banks would step back from their ultra-accommodative stance, pushing bond yields higher and bringing bond bears out of hibernation.

The concerns have grown since September when the Bank of Japan changed its focus from money printing to targeting government bond yields, and were exacerbated by rumors that the European Central Bank (ECB) might reduce the scale of its asset-purchase program.

ECB President Mario Draghi shot down any talk of tapering at the bank's Oct. 20 meeting, so the majority of survey respondents who answered a specific question on the ECB did not expect it to end its massive bond-buying program in March. But some investors expressed growing qualms.

Mark Robinson, chief investment officer of Bordier & Cie (UK), identified a number of risks, such as the waning efficacy of central bank policy, uncertainty around Brexit and anemic global growth.   Continued...

 
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 24, 2016.  REUTERS/Brendan McDermid