In BofA’s October Global Fund Manager Survey, investors were asked a simple question: at what 10-year Treasury yield would you consider shifting your allocation from stocks to bonds?
The answer, on average, was 5.9%.
What the survey found
Money managers are telling you where they’d start buying bonds instead of stocks. The most common answer was 6.0%, at 37% of respondents. Another 19% said they were already at levels that would prompt a shift. Smaller groups picked 6.5% (14%), 5.5% (12%) and 7.0% or higher (8%).
The 10-year has hovered near 5.09%. That puts the average trigger about 0.8 points above where we are today.
Why this is a big deal
The 10-year has been climbing for months, and I’ve said before that 5% is a line in the sand. This survey tells us where a lot of big money thinks the next one is.
Adding up the survey’s bars gives a rough picture. About 31% would act at 5.5% or lower, about 68% by 6.0%, and about 82% by 6.5%. In other words, if yields keep rising, a lot of potential buying shows up between here and 6%. That’s the kind of demand that can slow down a sell-off.
What this could mean for fixed income investors
Buyers may be waiting. If yields climb toward 6%, the survey points to potential demand stepping in.
Don’t try and time it. A 10-year above 5% already pays well. A ladder built in steps beats trying to catch the top.
Think about your own number. Decide what yield you’d add at, and write it down before the market tests you.
Remember the stock side. If managers do rotate, money leaving stocks for bonds is a story about equities too.
Bottom line
Everyone is watching for 6%. Don’t let waiting for it keep you out of today’s yields.