Investors Flee Junk-Bond Funds, Pour Record Cash Into High-Grade
Investment-grade buyers meanwhile added $4.4 billion, bringing January’s haul to $23.4 billion.
(Bloomberg) -- Investors pumped the brakes on U.S. high-yield credit funds as markets grappled with ramifications of the human and economic fallout from the coronavirus. More than $23 billion was added to high-grade bonds this month.
Buyers yanked $2.9 billion from junk bond funds for the week ended Jan. 29, nearly wiping out gains of the $3.6 billion added so far this year, according to Refinitiv Lipper data. This week marked the biggest withdrawal since the week ended Aug. 7 when investors pulled more than $4 billion.
Investment-grade buyers meanwhile added $4.4 billion, bringing January’s haul to $23.4 billion, in what is one of the biggest months ever for inflowing cash.
“There is a structural bid in the IG market and that will remain the case,” Goldman Sachs Group Inc.’s Chief Credit Strategist Lotfi Karoui said during an interview at Bloomberg‘s New York offices on Thursday before the data came out. “The recent selloff in high-yield was really a beta issue.”
The chill from the virus, which has been seen in travel companies such as air and cruise lines, has also dampened new debt sales. Just over $10 billion has priced against estimates of as much as $25 billion. Still, heavy issuance earlier this month propelled January to the second highest for that month on record.
Read more: January Supply Tops Estimates; Secondary Absorbs High-Grade Debt
Investors pulled close to $1.4 billion from the biggest junk-bond ETF, HYG, on Friday, the largest on record. It was the busiest month for new high-yield bond sales in a decade, with about $36 billion pricing.
--With assistance from Gowri Gurumurthy, Michael Gambale and Rizal Tupaz.
To contact the reporter on this story: Andrew Kostic in New York at akostic@bloomberg.net
To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Christopher DeReza
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