BofA: Inflows Moderate As Fund Auction Bid Retreats

Bank of America note that “flow data showed better buying from foreign officials and performance suggests that domestic FI funds have moderated underweight positions.”

• “However, fund flows into USTs cooled this past week and auction allocations show investment funds have been moderating their bid.”
• “While October stripping activity was historically large, the 30y auction suggests that investors were sceptical of the meaningful rate retracement over the past two weeks.”
• “CTAs continue to cover shorts at the back end of the curve and our models suggest there can be more covering to come if momentum points longer.”
• “While we see room for an improved demand backdrop, it hinges on greater conviction in the end of the Fed hiking cycle. This can be confirmed or rejected by this week's economic data.”