A sharp rise in bond yields is a bigger concern for fund managers than COVID-19 - and most believe crypto is in a bubble, but stocks aren't even close, BofA said

• A so-called 'taper-tantrum' is now worrying investors more than Covid-19 and inflation, according to Bank of America.
• Almost 75% of people believe crypto is in a bubble, while less than 10% believe equities are, BofA said.
• Expectations for a V-shaped recovery are at 50%, up from 10%, BofA said.

Fund managers are now more worried about a so-called "taper tantrum" in the bond market than Covid-19 or inflation, according to a Bank of America global survey of fund managers. Wider macroeconomic and market-specific optimism however remained high.

Government bond yields have risen sharply over the past few months, as evidence of recovery has fed optimism over the economic outlook, prompting some to consider the possibility of the Federal Reserve withdrawing monetary policy support more quickly than expected.

The result is a so-called "taper-tantrum", where concern over a prompt tapering in Fed support for the economy sparks an aggressive sell-off in government bonds, thereby pushing up yields.

According to Bank of America's monthly global fund manager survey, a taper tantrum is the biggest tail risk as far as investors are concerned, trumping both Covid-19 and inflation.

"A year ago, COVID-19 was named a global pandemic on March 11th. Now in April 2021, a mere 15% cite COVID-19 risk as the biggest tail risk, lower than even "higher taxes" at 15%. Taper Tantrum is now first at 32%, followed by inflation at 27%," the bank said.

The yield on the benchmark 10-year Treasury note is currently around 1.6%, up from around 0.75% just six months ago. The yield hit its highest since last January in late March, trading around 1.77%.

Between February 2020 and March this year, the pandemic ranked as the main worry, but the long-term impact of economic policies related to Covid-19 have now taken over. Covid-19 itself is now the fourth biggest risk factor. "Risks (are) now associated with boom, not recession," BofA said.

One of the side-effects of the Fed's policy of pumping as much extra cash into the financial system as possible has been to send asset prices for stocks, cryptocurrencies and some commodities to multi-year, and even, record highs.

The monthly survey found 74% of survey respondents believe cryptocurrencies are in a bubble. Bitcoin hit a record high above $63,000 on Tuesday, having more than doubled in value since the start of the year, while other digital assets, such as non-fungible tokens, or NFTs, have surged in price and popularity in recent months.

US benchmark stock indices have reached record highs this month. The S&P 500 has gained 10% so far in 2021 and around 45% in the last 12 months. But only a minority of respondents believe equities are in a bubble. Just 7% said this was the case.

Instead, 66% of investors think stocks are in a late-stage bull market, boosted by economic and monetary stimulus, including President Joe Biden's $1.9 trillion infrastructure spending plan.

The wider macroeconomic picture appears to be positive for investors, as the "past year expectations for "V-shaped" recovery have picked up to 50% from 10% previously, the survey showed.