Investors Withdraw Most Cash From U.S. Credit Funds in a Decade

(Bloomberg) -- Investors withdrew $12.2 billion from U.S. funds that buy corporate bonds and loans, the biggest weekly total in at least a decade, as the spreading coronavirus battered markets globally.

High-grade bond funds saw $4.8 billion of outflows in the week ended March 4, according to Refinitiv Lipper. Junk-bond funds had $5.1 billion withdrawn, while leveraged loan investors pulled $2.29 billion during the period. The outflows represented the largest combined total in data compiled by Bloomberg going back to January 2010.

Investors have pulled back from credit as worries intensify that the spreading virus will slash economic growth and crimp corporate cash flows. A widely followed derivatives index that measures risk in U.S. credit markets has surged in the past two weeks as investors rushed to hedge against losses. The market turmoil shut the U.S. investment-grade bond market for six straight days before reopening this week, and lending in the junk-bond and leveraged loan markets has slowed to a trickle.

The withdrawal from investment-grade funds was the biggest since May 2019, a period that was chalked up to an internal transfer between Fidelity Investment funds, rather than a pullback by investors. Excluding that, it was the largest outflow for the funds since December 2015.

The outflow from junk-bond funds, the biggest since March 2017, followed a $4.2 billion withdrawal the prior period.

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