Bond, equity funds suck-in $25 billion as ‘irrational’ bull phase continues: BofA

LONDON (Reuters) – Global equity and bond funds saw more inflows in the week to Wednesday and the “irrational bullish phase” in markets was likely to continue in the first-quarter if the U.S. Fed continued to pump-in liquidity, BofA said on Friday.

Bond funds attracted $16.2 billion and equities sucked in $8.5 billion last week even as concerns over the spread of a deadly virus in China rattled markets, BofA said citing EPFR data. At $4 billion, emerging market equity funds saw their biggest inflows in 57 weeks.

Pointing to the exuberance in markets, BofA said peak positioning in stocks, peak liquidity pump by central banks, ultra-low forex volatility, bubbly bonds and new lows in bond yields were some of the catalysts that could derail the rally.

The bank said it would buy a put option — used by investors as protection against serious falls in prices — as the S&P 500 <.SPX> approaches 3,500.

(Reporting by Thyagaraju Adinarayan, editing by Karin Strohecker)