Investors Cool on High-Yield Bond ETFs
April 13th 2012 at 9:14am by John Spence
Recent weakness in high-yield corporate debt and global growth jitters have caused investors to pull cash from junk bond ETFs for the first time in nearly five months.
Junk bond mutual funds and ETFs saw net outflows of $1.3 billion in the latest week, their first outflow in 19 weeks, according to Lipper data.
“The massive withdrawal follows 18 straight weeks of inflows, but continues a trend that has seen investors back away from the junk-bond market in recent weeks because of renewed fears about the strength of the global economy and about Europe’s sovereign-debt crisis,” Dow Jones Newswires reports.
High-yield ETFs such as iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) and SPDR Barclays High Yield Bond (NYSEArca: JNK) recently dipped below their 200-day moving average for the first time this year before recovering. [Are High-Yield ETFs About to Get Junked?]
Technical analysts keep an eye on junk-bond ETFs as a leading indicator for U.S. stocks and risk appetite.
Junk bond ETFs have been huge sellers in 2012 with investors pumping money into investment grade and high-yield corporate bond funds in search of income. [Corporate Bonds Dominate Fixed-Income ETF Flows]
“Investors jumped back into junk bonds earlier this year as negative headlines from the European crisis dwindled, following a period of high volatility late last year, only to see some of those headlines return,” Dow Jones reported.
“The high yield market, until a few days ago was getting very frothy,” said Dan Fuss, bond fund manager at Loomis Sayles, in the article. “Now I would suspect [some] high-yield managers are trying to figure out what they are going to sell.”
Fuss this week said it may be a good time for investors to consider stocks and move away from bonds if interest rates begin to move higher. [ETF Moves to Make if Interest Rates Rise]
SPDR Barclays High Yield Bond
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