Global equity fund investors halt eight-week buying streak as bond yields rise.

Global equity funds recorded the ⁠first ⁠weekly outflow in nine ⁠weeks in the week through May 20, as investors ​turned cautious over inflation and a rise in long-term borrowing costs to nearly ‌two-decade highs.

According to LSEG Lipper ‌data, investors liquidated a net $6.13 billion of global equity funds during ⁠the week, ⁠logging their first weekly net sales since mid-March, when they ​had withdrawn a net $21.87 billion.

The 30-year U.S. Treasury yield climbed to 5.201% on Wednesday, its highest since 2007, as uncertainty around a possible resolution to the ​Middle East conflict raised concerns over energy prices and inflation. It last ⁠traded ⁠at 5.0795%.

U.S. equity funds suffered ⁠the ​second weekly outflow in three weeks, to the tune of $12.05 billion. Asian funds ​also recorded net ⁠outflows of $570 million, though European funds attracted a net $4.62 billion in inflows.

Technology sector funds were popular for a seventh successive week, with net inflows of $6.94 billion. Financials and industrials, however, had weekly outflows of $2.8 billion and $1.3 ⁠billion, respectively.

Investors, meanwhile, bought a net $21.89 billion of global bond funds as ⁠they extended the recent buying streak into a seventh successive week.

Short-term bond funds, government bond funds and euro-denominated bond funds witnessed significant weekly net purchases of $7.47 billion, $3.09 billion and $1.68 billion, respectively.

Money market funds recorded a lighter $1.06 billion weekly net inflow, after a net outflow of $10.41 billion the prior week.

Gold and precious metals commodity funds saw a net $2.34 billion of weekly inflows, remaining popular for a ⁠second straight week.

In emerging markets, investors shed a net $2.95 billion of equity funds, resulting in a fourth straight week of outflows. They also withdrew $256 million from bond funds after a run of ​six weekly purchases, combined data for 28,926 funds showed.

This week ⁠kicked off ⁠with a fresh surge in sovereign bond yields around the world as the Iran ⁠energy shock kept up the pressure on oil prices, inflation expectations and rate-hike bets. Global equities were volatile against that backdrop as the risk-off turn took some attention away from the AI frenzy, though major ​indexes ticked up later in the week, led by buoyant chipmakers.

Government borrowing costs notched several milestones as bonds came under renewed pressure this week, with 30-year U.S. Treasury yields hitting their highest point since 2007. Japan’s long-dated borrowing costs also hit new record highs and Britain’s gilt yields hit their highest since the 1990s as investors ‌fretted about a possible change in Prime Minister. The bond selling abated late ‌in the week, with gilts catching a break from below-forecast UK inflation and signals from the main challenger to Keir Starmer’s premiership, Manchester mayor Andy Burnham, that he would stick to the government’s existing fiscal rules. 

But the situation in the Gulf remained the major aggravator of bond yields as the energy shock showed no sign of ⁠abating. Oil prices were volatile throughout the ⁠week, with fresh attacks in the region over the weekend pushing Brent crude back over $110 per barrel on Monday. Prices later dipped as low as $105/bbl on Wednesday after ​reports that supertankers carrying some 6 million barrels had transited the Strait of Hormuz.

Meantime, President Trump continued his hardball strategy: floating fresh military action while urging Tehran to strike a peace deal, all while talking up prospects for a breakthrough. Oil prices spiked once more on Thursday, however, after Tehran appeared to harden its stance on its nuclear programme, underscoring the distance that remains between the two sides’ negotiating positions.

The clock is ticking for energy markets. Experts including IEA chief Fatih Birol warned this week of a looming crunch point, as the world’s crude inventories threaten to hit critically low levels in the near future if the Strait of Hormuz stays effectively shut. That could mean the global market is ​only months away from a breaking point.

While any let-up in oil prices could relieve pressure in the bond market, the summer months could be a real crunch in disrupted fuel supplies.

Indeed, the past week’s ructions could be a foreshadowing of what’s in store for markets ⁠now ⁠that – under the new leadership of Kevin Warsh – they can ⁠no longer assume that the Federal Reserve will always step in to buy ​bonds in a pinch.