Investors Pull Most From Junk-Bond Funds Since 2018
Junk-bond funds suffered severe outflows as anxiety over the spread of the coronavirus weighed on financial markets.
(Bloomberg) -- Junk-bond funds suffered severe outflows as anxiety over the spread of the coronavirus weighed on financial markets.
High-yield investors pulled $4.2 billion during the week ended Feb. 26, according to data compiled by Refinitiv Lipper. It’s the seventh biggest withdrawal on record and compares with an outflow of just under $40 million the prior week. About $4.9 billion was pulled during the reporting period in October 2018 and $6.3 billion in February of that year.
The two largest junk-bond exchange traded funds have suffered record outflows. Between them, iShares’s iBoxx High Yield Corporate Bond fund and State Street’s SPDR Bloomberg Barclays High Yield ETF saw $5.2 billion exit over the past week, according to data compiled by Bloomberg.
High-yield bond investors are trying to assess the big unknown: whether the coronavirus will be just a short-term problem if it can be contained, or, far worse, turn into a pandemic that could pose a long-term drag on the economy and spark a recession. Global bond issuance markets have been virtually closed for the better of the week as borrowers are being kept on the sidelines by a jump in risk premiums amid fears that the spreading virus will disrupt global growth.
Lipper data show $3.7 billion added to investment-grade funds in the week ended Feb. 26, as buyers continue to move up in quality. Last week funds saw inflows of $5.14 billion. That brings this year’s total of inflows to $43.3 billion, the biggest start to any year in data going back to 1992. U.S. leveraged loan funds saw $952 million of outflows for the week ended Feb. 26, according to Refinitiv Lipper.
The biggest outflow from U.S. junk bond funds was $7.068 billion in August 2014.
| DATE | OUTFLOW $ |
| AUG. 2014 | 7.068B |
| FEB. 2018 | 6.300B |
| MAR. 2017 | 5.680B |
| OCT. 2018 | 4.927B |
| JUN. 2013 | 4.633B |
| NOV. 2017 | 4.441B |
| NOV. 2016 | 4.115B |
| AUG. 2019 | 4.072B |
| FEB. 2020 | 4.198B |
--With assistance from James Crombie.
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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