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Follow The Flow: QE is lifting all boats

According to Bank of America Merrill Lynch, continuing ECB QE is lifting all assets. Flows have improved in May across IG, HY and equity funds in Europe. Last week’s flows - HG: +$1.4bn / HY: +$48mn / Equities: +$1.1bn

Strongest in months

QE is lifting all boats. In May IG funds recorded their strongest inflows ever. Similarly equity funds in Europe recorded the strongest monthly inflow since late 2015 according to EPFR. Across European risk assets flows have been clearly improving, with investors also embracing yield via EM debt that recorded another month (5th in row) of inflows.

Over the past week…

High grade funds recorded another week of inflows; their 22nd in a row. The recently released monthly data show that in May the asset class recorded the strongest inflows month ever, as well as the fifth consecutive one. High yield fund flows were marginally positive after a quick dip in negative waters last week. However, looking into the domicile breakdown, as Chart 14 shows, flows to European-focused HY funds continue to be strong and positive. The aggregate number has been pulled down predominantly by US-focused funds, amid the pressure of falling oil prices. Monthly data for European domiciled HY funds depict an improvement of the recent trend.

Government bond fund flows remained on positive territory for a third week in a row. Overall, Fixed Income funds recorded their fourteenth consecutive weekly inflow predominately driven by strong flows into credit funds.

European equity funds flows were positive for the 13th week in a row. In May, equities funds saw a significant improvement in their inflows, reaching the highest level since October ’15.

Chart 1: Monthly funds flows ($mn )

Next Finance , June 2017

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Bank of America Merrill Lynch

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