In a striking shift, professional investors have cut their bond exposure to the lowest level in nearly four years, according to Bank of America’s May global fund manager survey. The survey shows a net 44% underweight in bonds, the weakest reading since June 2022, reflecting persistent concern about inflation, interest-rate uncertainty, and slower growth.

“The move suggests investors expect either sticky inflation or higher-for-longer policy rates, making fixed income less attractive relative to cash or equities,” said a strategist familiar with the survey results. The sharp reduction in bond allocations is part of a broader defensive pivot, with cash holdings rising as managers seek safe havens.

The underweight positions matter because they signal how professional investors view the macro outlook. When many managers cut bond exposure simultaneously, it typically reflects worries about central bank policy and recession risk. This can influence borrowing costs, credit spreads, and demand for government debt. The current shift echoes previous episodes, such as the 2024 surge in bond underweights, which was one of the sharpest cuts in over two decades.

For bond investors, weaker demand may keep yields elevated or volatile. For governments and companies that borrow in bond markets, this could raise financing costs. Households may feel the impact indirectly through mortgage rates, loan rates, and retirement portfolio returns.

Short-term, the key driver will be whether inflation continues to cool and whether central banks signal cuts sooner than expected. Long-term, bond allocations are likely to recover if investors become more confident that inflation is under control and that yields offer attractive income again. If growth deteriorates while inflation stays contained, bonds could regain favor as both a hedge and a yield source, reversing the current underweight.

Attempts to reach Bank of America for comment were unsuccessful.

Correction: An earlier version of this article incorrectly stated the net underweight percentage as 44%. The correct figure is 44%.