Global investors poured a record quantity of money into fixed-income capital for the week ending Wednesday, since the coronavirus outbreak intensified fears of a worldwide growth slowdown.
Fixed-income mutual funds and exchange traded funds earned $23.6bn, the largest weekly ingestion as 2001, based on EPFR Global. Inflows to US bond funds accounted for $15.4bn of their total. This comprised $10.3bn to US investment grade bonds.
Goldman Sachs analysts said the outbreak of this virus, that has claimed over 1,100 lifestyles and infected at least 44,000 individuals, could shave an annualised 2 percent from international gross domestic product growth in the first quarter, driven by”poorer expansion in China, lower Chinese tourist spending, and reduced Chinese products imports”.
Federal Reserve chairman Jay Powell alluded to the knock-on impact in his testimony to Congress this week, noting that the US is”closely tracking the development of this coronavirus, which might result in disruptions in China that trickle over to the remaining international market”.
Similar warnings helped lift safe-haven assets such as US Treasuries, gold and the dollar, even when they neglected to hit on the riskier corners of this marketplace.
Based on EPFR, stock capital around the world attracted $12.5bn for the week ending Wednesday — a small moderation in the previous week.
US high-yield bond funds saw their very best week as September, racking up $2.4bn of inflows, while emerging market bond funds brought $2bn, a three-week high.
“it is a conundrum,” said John Porter, chief investment officer for Mellon. “You have not seen any actual panic on the marketplace.”
That may soon change if the virus shows very little indication of abating.
“Investors are denying that this virus scare is still another bit of proof about how delicate global economic development is,” Mr Porter said. “It is totally a guess of what the effect of the virus is.”
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