Great Rotation Proves Short Lived as Investors Switch From Stocks to Bonds

The exudes seen in bond funds last year has shown persistent signs of reversal in 2014. Indeed, over the last four weeks about $12.4bn flowed into bond funds (blue line). Meanwhile, equity funds, which saw positive flows throughout most of 2013 and the first few month of 2014, are now beginning to experience outflows. Over the last four weeks about $700mn has been withdrawn from equity funds (red line). This flow behavior goes a long way in explaining the strength in the treasury market so far in 2014 (2nd chart).