Global fund managers are re-evaluating a previously negative view on bonds, primarily because of concern about the strength of corporate earnings and this month's pause in U.S. interest rate hikes, according to a monthly report from Merrill Lynch.
Only 22% of fund managers perceive global bond markets to be overvalued, down from 48% in May, according to the survey of 209 fund managers conducted Aug. 4-10.
"The big call this autumn is shaping up to be: will this liquidity be directed back into equities, or could it head for the bond market instead?" said David Bowers, Merrill Lynch chief global investment strategist, said in a news release. "How investors respond to this question may boil down to whether they expect the Fed to be more concerned about the risk of inflation or the risk of slower growth."