Bank of America Merrill Lynch survey

Among the top three concerns for investors at this time is a crash in global bond markets.

When asked what poses the biggest “tail risk,” or get worried for the financial marketplace, 22 percent of global investors considered the biggest risk to be a sharp drop in bonds, according to Lender of America Merrill Lynch’s November Global Fund Manager Survey away Tuesday.

That’s just below the 27 percent of respondents that fear mistake in monetary policy by the Federal Reserve or European Central Lender the most.

Just 13 percent were virtually all worried about a “marketplace structure”-generated flash crash.

What do you consider the biggest “tail risk”?

Source: Lender of America Merrill Lynch, November Fund Manager Survey

Bond rates fall when yields surge, plus some key global relationship yields have climbed to multi-year highs within the last couple of days. The iShares iBoxx $ Superior Yield Corporate Bond ETF (HYG) was tracking Tuesday for its lowest close since March.

“If you see even more weakening in bond market segments, particularly credit bond market segments or corporate bond market segments, it’s going to have a negative effect on stock market segments,” Michael Hartnett, chief expense strategist at BofAML, told CNBC in a telephone interview Tuesday.

Global bond yields attended quite a distance since hitting historical lows on July 11, 2016, a date Hartnett has called “a massive, secular inflection point” which will have major effects.

In the U.S., Treasury yields have climbed within the last few weeks amid targets of tighter monetary policy and an elevated deficit under tax reform. In China, Beijing’s focus on reducing reliance on high credit growth has raised worries about tighter monetary policy and slower economical growth.

The Chinese 10-year sovereign bond yield hit 4.033 percent overnight, its highest since Oct. 14, 2014.

“China’s bond [yield] striking that 4 percent level has to do with post [National Communist Party] Congress, people are concerned about deleveraging,” explained Marc Chandler, chief currency strategist at Brown Brothers Harriman.

The U.S. 2-year Treasury yield traded Tuesday near 1.69 percent, near its highest since Oct. 21, 2008. The Federal Reserve started unwinding its balance sheet in October by reducing its relationship purchases and is likely to raise short-term interest rates in December.

The benchmark U.S. 10-year Treasury yield traded mildly lower around 2.38 percent, nearby the high end of a post-election trading range. German and Japanese 10-year sovereign bond yields also have climbed solidly into confident territory after turning bad last year.

When BofAML conducted the survey from Nov. 3 to 9, a near-record 81 percent of respondents said bond market segments are overvalued.

Top rated “tail risk” for fund managers (Oct. 2015 – Nov. 2017)

Source: Lender of America Merrill Lynch, November Fund Manager Survey

The most recent BofAML survey had 178 participants with $533 billion in assets under management.

To be sure, fund manager fears can be misplaced. The very best worry from July to September last year was “GOP wins White House.” U.S. inventory index futures plunged on election nighttime but quickly recovered and have surged to record highs pursuing Republican President Donald Trump’s shock election win.

“There is no concern with the Fed. None. And until there is it’s going to be problematic for markets to decrease in a huge way,” Hartnett said.

“The catalyst must be inflation, specifically wage inflation,” he said.

Average hourly earnings posted a 2.4 percent upsurge in the 12 months through October, down from a 2.9 percent annualized upsurge in September.

– CNBC’s Patti Domm contributed to the report.

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