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US mutual fund investors investing new cash in debt vs equities at 15:1


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Attached is a summary of US mutual fund investor new cash flows. 




The surge back into bonds this year, from sterling triple-A securities to riskier junk notes, has amazed even longtime analysts and fund managers.


Investors who ran for the relative safety of money-market funds during last year’s credit crisis have been shoveling their cash into bond funds. Some $265 billion has flowed into bond funds since the beginning of the year, according to figures from the Investment Company Institute, 15 times the money that has entered equity funds.


“The easy trade is something you want to be wary of, and the easy trade right now is into the high-quality fixed income market,” said Lawrence Glazer, a managing partner at Mayflower Advisors. “Look at the flows: people are falling over themselves. That should be a caution flag for investors.”


A wide gauge of the market for junk bonds is up nearly 50 percent for the year, compared with a 13.5 percent yearly return for the Standard & Poor’s 500-stock index. The risk premium on junk bonds over Treasuries — called the spread — narrowed to 7.5 percentage points last week from more than 16 percentage points at the start of the year, according to Standard & Poor’s figures.

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