Global Stock Liquidity Drops by $6 Billion Under Pressure from Bond Yields

SadaNews Economy - Global equity funds recorded their first weekly outflow in 9 weeks during the week ending May 20, amid growing caution among investors regarding inflation prospects and long-term borrowing costs reaching their highest levels in nearly two decades.

According to "LSEG Lipper" data, investors liquidated a net $6.13 billion from global equity funds, marking the first weekly net sales since mid-March, driven by the rise in the yield of the 30-year U.S. Treasury bond to 5.201%, its highest level since 2007, which heightened concerns about the impact of high financing costs on growth sectors and corporate profits, according to "Reuters".

U.S. Markets Lead Declines

Geographically, U.S. markets led these declines due to profit-taking, as a net $12.05 billion was withdrawn from U.S. equity funds, the largest weekly sales level since mid-March, with withdrawals from large, mid, and small-cap funds amounting to $7.18 billion, $1.86 billion, and $555 million, respectively.

In contrast, European funds saw inflows totaling $4.62 billion, while Asian funds recorded outflows of $570 million, with investors shedding a net $2.95 billion from emerging market equity funds for the fourth consecutive week.

The yield on the 30-year U.S. Treasury bond rose to 5.201%, raising concerns about its implications for growth stocks and corporate profit margins.

By sector, investors withdrew investments from large, mid, and small-cap equity funds amounting to $7.18 billion, $1.86 billion, and $555 million, respectively.

Technology Sector Funds

On the other hand, global technology sector funds continued to sing a different tune, attracting liquidity for the seventh consecutive week with a net inflow of $6.94 billion, while the financial and industrial sectors experienced weekly outflows of $2.8 billion and $1.3 billion, respectively, due to slowdown concerns.

U.S. bond funds attracted investments totaling $12.5 billion, in line with the net purchases from the previous week amounting to $12.83 billion.

Investment-grade short- to medium-term bond funds, government bond funds, Treasury bonds, and municipal bond funds recorded inflows of $4.63 billion, $4.43 billion, and $1.53 billion, respectively.

Conversely, investors bought a net $12.04 billion from U.S. money market funds, reversing the outflows of $4.19 billion from the previous week.

Asian funds also experienced outflows of $570 million, compared to inflows into European funds totaling $4.62 billion.

Bond Markets

In the bond markets, investors purchased a net $21.89 billion from global bond funds, continuing a buying spree for the seventh consecutive week.

Short-term bond funds, government bonds, short- to medium-term Treasury bonds, and euro bond funds recorded weekly inflows of $7.47 billion, $3.09 billion, and $1.68 billion, respectively. Money market funds also saw inflows of $1.06 billion, compared to outflows of $10.41 billion in the previous week.

Meanwhile, gold and precious metals funds attracted inflows totaling $2.34 billion, continuing their positive performance for the second week in a row.

In emerging markets, investors shed a net $2.95 billion from equity funds, marking the fourth consecutive week of outflows, and they withdrew $256 million from bond funds after a six-week buying streak, according to data covering 28,926 funds.