2. December 2023

• According to a Bank of America (BofA) report, worried investors have been increasing their bond holdings and cash reserves in May.
• BofA’s survey reveals the highest bond allocation in the past 14 years, as investors fear potential recession.
• Ryan Payne from Payne Capital Management warns against investing into bonds at the moment, citing danger of “following the herd” and forming a bubble.

Rise of Bond Holdings and Cash Reserves

According to a recent report by Bank of America (BofA), apprehensive investors have been pumping their bond holdings in May, as well as cash reserves, fearful of a possible recession. The May Global Fund Manager Survey revealed managers continue to increase their bond allocations to 14% from 10% the month before. Moreover, it is the highest allocation to bonds in the past 14 years.

What Are Bonds?

Bonds are debt securities, similar to an IOU (phonetic acronym of the words “I owe you”). Governments, municipalities, or corporations issue bonds to raise funds from investors willing to lend them money for some time. When you buy a bond, you lend to the issuer, collecting interest. Bonds do not represent ownership, and their yield may vary depending on the Federal Reserve’s policy. Notably, Fed Chair Jerome Powell has been raising interest rates up to 5% in 10 consecutive revisions since Q2 2022 with its latest hike in Q1 2023.

Dangerous Place To Be?

The Fed’s hawkish policy prompted Ryan Payne, President of Payne Capital Management (PCM), to call the bond market a “dangerous place to be” at present times. In an interview with Reuters he mentioned that 25% of all bond inflows throughout ten years happened only within last 10 months – this indicates formation of a bond bubble due large retail money inflow into same area – bonds specifically.

Survey Does Not Reflect Market Confidence

The survey also showed that most respondents still expect a soft landing despite weak global growth expectations which were up from 63% last month –the highest result yet recorded this year 2023 (65%). The survey included 289 fund managers overseeing $735 billion worth assets combined together..


It appears that wary investors are putting money into safe havens such as bonds and cash reserves amid fears about global economic slowdown due rising interest rates set by Federal Reserve over past few months . Although majority of surveyed fund managers see hope for soft landing , dangers posed by following herd mentality and forming bubble remain high according Ryan Payne from PCM .