By removing liquidity via massive purchases of high quality (and in some cases) low quality collateral, the impact on investors of central bank repression of interest rates around the world can be summed up in three simple words: "reach for yield." These three ever-so-simple words provide blanket excuse for 'investors' to pile head long into far riskier investments than they ever would before and considerably lower levels of compensation than they would ever have accepted before... but hey, as long as the central bankers have got their backs, there will always be a greater fool? However, as BofA notes, the mania for "yield reaching" is showing signs of fatigue with the biggest cumulative outflows since 2008...
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Note: the current outflows are considerably larger than those during the Taper Tantrum
Does this mean investors have entirely given up on yield and have moved on to the more speculative non-earnings producing, negative free-cash flowing, "stocks always go up, just look at China", stocks of the new bubble? Or is derisking beginning as The Fed desperately rearranges deckchairs on the "but hiking rates is not tightening" titanic of cheap-buyback-sponsored equity exuberance?
Source: BofAML
