Bank of America Merrill Lynch’s latest (10/07/2015) European client Credit Investor Survey, shows that due to China/EM fears, the past week has seen the biggest risk reduction by investment-grade credit accounts since the Greek crisis in mid- 2011. Credit overweights have fallen to just 9% now, from 32% in July.
Not only are crowded trades dissipating, but investors’ cash levels are now higher than average. In fact, cash is now investors’ biggest overweight. The average cash level for investment-grade investors has jumped from 4.9% to 6.2%, close to the highs of 6.5% seen in late 2011.
According to BAML’s survey, this hefty cash weighting amongst investment grade clients is to help manage potential outflows, given challenging secondary market liquidity. It’s interesting to note that investment-grade accounts have seen no net inflows over...
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