Huge Inflow into High Yield Bond Funds

October 22nd, 2015 6:56 pm | by John Jansen |

Via the FT:

High-yield bond funds see biggest inflows since ’11

Investors raced back into higher-yielding junk bond funds at the fastest pace in four years, following a broad rally in both equity and fixed income markets as concern the Federal Reserve will tighten policy this year faded.

US mutual and exchange traded funds invested in speculative bonds β€” those rated double B plus or lower by Standard & Poor’s or Fitch β€” counted $3.3bn of inflows in the week to Wednesday, the greatest single weekly take since October 2011 and the second largest on record since 1992, according to fund tracker Lipper.

The new money, buoyed by ETF buying, lifted year-to-date flows into positive territory after months in the red. Fixed income and equity markets have bounced since a summer selloff pushed global benchmark stock indices into correction, US capital markets correspondent Eric Platt reports.

Junk bond funds have recorded their best single month since the first quarter of 2012 following four months of declines, gaining 2.64 per cent, according to Barclays Indices.

The summer declines, exacerbated by a jump in new junk bond issuance at the start of the year and weakening economic activity in China, have nearly shuttered the primary high-yield market.

Investors remain skittish since the summer selloff, with many pointing to steadily rising debt burdens, slowing revenue growth and a jump in deals as a sign that the current credit cycle is drawing to a close.

“You had a big short squeeze and a lot of sentiment turned following a couple days of stability and a strong rally for the whole week,” Eric Gross, a strategist with Barclays, said. “It wasn’t necessarily an [improvement in] macro fundamentals, I don’t think much has changed on that front. The same concerns exist.”

High-grade corporate bond funds also attracted fresh capital in the last week, the data showed. Investors pumped $874m into investment grade debt funds, as well as $4.3bn into US-based stock funds.

Money market accounts, which counted nearly $30bn of inflows in the last four weeks, saw $2.6bn in withdrawals β€” a sign investors were once again deploying cash on the sidelines.

Be Sociable, Share!
  1. 2 Responses to “Huge Inflow into High Yield Bond Funds”

  2. By scottinnj on Oct 23, 2015 | Reply

    Maybe I missed that day in finance class, but I can’t get the math to work if you sell after prices fall and buy after prices rise.

  1. 1 Trackback(s)

  2. Oct 23, 2015: 2:00PM Water Cooler 10/23/2015 | naked capitalism

Post a Comment