In its latest Fund Manager Survey, Bank of America asked what may be the most important questions for investors today: “What level of US 10y Treasury yields would cause you to rotate from equities into bonds?” That level, which Bank of America's Michael Hartnett has repeatedly dubbed the “magic number”, rose from 3.5% last month to 3.6% in the May survey, and represents that weighted mid-point of the responses by the 223 survey participants, who manage a total of $643BN .

As a reminder, last week Hartnett explained why he agrees with the FMS response, saying “it should not be a surprise if reallocation starts before yields get to 3.5%.

Mead stated the obvious to the Bloomberg Invest summit in Sydney: “we do think this hiking cycle is quite well advanced.” adding that while “the backdrop of the US economy has been pretty strong and going for a long time.

Mead then said that the higher rates rise, the more the record short overhang will, or at least should, be unwound: “Nothing is pound-the-table cheap,” but rising yields mean investors can gradually reduce their underweight bond positions, Mead told the Bloomberg conference.

Confirming this observations, Mark Delaney – the chief investment officer of AustralianSuper Pty, the nation's largest pension fund – said he was thinking about buying bonds again after selling almost all holdings last year.

Categories: ZH