6%. On 10s.
That’s what it’s gonna take to tempt professional capital allocators to rotate out of equities and into obligations secured by the full faith and credit of the US government.
That was one of the main takeaways from the October vintage of BofA’s closely-watched Global Fund Manager survey, released on Tuesday.
The fact that America’s longer-term lenders want to be compensated to the tune of a six-handle speaks to a lot of things, not all of them political, but… well, suffice to say the whole “full faith and credit” pledge doesn’t carry the same weight it used to. Apportion the blame as you see fit. There’s plenty to go around.
There’s the chart. As you can see, about one in five respondents suggested they’re already nibbling at oversold benchmark US debt, and 12% said another 25bps higher on 10s would be sufficient to pique their interest.
The implied allocation to equities in the poll reflected a net 44% Overweight, down from last month’s 49%, but still meaningfully (0.7 standard deviations) above the long-term average. The bond Underweight was a net -37% versus -48% in September.
The figure below tips a shift in sentiment following the march higher in G7 yields.
That’s the net share of survey respondents expecting higher bond yields over the next 12 months. We’re basically “flat” on that metric, which is to say professional investors are now evenly split on whether there’s more upside for yields following the dramatic late-summer bond selloff.
“Pessimism on bond yields fell to the lowest since May of 2025 [with] just a net 1% of investors expect[ing] higher long-term rates, down from 15% in September,” BofA’s Michael Hartnett remarked, in the editorial accompanying this month’s poll.
To be sure, jitters persist. “Disorderly rise in bond yields” topped the tail risk list again, with more than 30% of the vote.
As the figure shows, “AI bubble” was second with 23%, followed by a “second wave of inflation” with 20% and “hyper-scaler credit event” with 11%.
Apparently, hyper-scalers’ ballooning debt burden is a bigger risk than World War III, which captured just 9% of the tail risk vote even after doubling its share from September.
The title of this month’s survey: “The Sixth Sense.” (Golf clap, Mike. Golf clap.)
I’d be curious to hear the rationale of the folks who say a dem sweep is the biggest tail risk. Of all the things that could go wrong, that’s their boogeyman? I suppose it’s a reflection of the MAGA fund managers out there.