Investors are not yet ready to abandon equities for Treasuries, even as bond yields climb, according to the latest Bank of America Global Fund Manager Survey. The survey found that fund managers, on average, need the 10-year Treasury yield to reach 5.9% before shifting their asset allocation from stocks to bonds.

The 10-year yield stood at 5.22%, according to Yahoo Finance, with strong economic growth driven by the AI boom pushing real yields higher. That leaves the benchmark roughly 0.7 percentage points short of the level at which managers say bonds become attractive.

Bonds, which move inversely to yields, have suffered a steep sell-off since March 2022, when the Federal Reserve began raising interest rates. Stocks, by contrast, have been the preferred destination over the past four years of the bull market, with Big Tech’s soaring capital spending on AI infrastructure lifting its shares to record highs.

Still, the rapid climb in yields this year, combined with high oil prices, worries about AI-related risks, and weak market breadth has prompted warnings of a possible pullback in equities.

The survey reflects those concerns. About 32% of respondents named a “disorderly rise in bond yields” as the biggest tail risk to markets, making it the top worry. A further 23% pointed to an AI bubble as the greatest threat.

Managers were closely split on whether an AI bubble will emerge in 2027, with 45% saying yes and 42% saying no. The findings suggest that while investors are increasingly wary of rising yields and stretched AI valuations, they remain committed to equities for now, with bonds failing to offer a compelling enough return to draw money away from stocks.

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Source: https://finance.yahoo.com/markets/article/fund-managers-wont-dump-stocks-for-bonds-until-yields-hit-59-bofa-survey-says-chart-of-the-day-161252255.html