Investors nibbled at high-yield bond ETFs and mutual funds in the latest week after pulling $6.5 billion the previous month on Europe’s debt crisis and global credit jitters.
For the week ended June 13, ETFs that invest in non-investment-grade corporate bonds saw net inflows of $390 million, according to Dow Jones Newswires.
“The markets have been very choppy, but investors have been looking to buy this asset class on dips, and we have just had a big dip,” said Keith Bachman, head of U.S. and global high yield at Aberdeen Asset Management, in the report. Investors were trying to “take advantage of the asset class” because it has “very little in the way of default risk.”
High-yield bond ETFs have recovered somewhat in the latest week following a strong risk-off bout. Investors have been favoring “safe-haven” government debt in countries such as the U.S. and Europe over corporate bonds. [Europe Woes Sap High-Yield Bond ETF Demand]
Last week, one high-yield ETF saw the biggest one-day outflow of cash in its history. [Junk Bond ETF Sees Big Outflow]
Over the past four weeks, high-yield ETFs have experienced outflows of $1.6 billion, according to the Dow Jones report, which cited Lipper data.
As of June 6, the two largest ETFs for the category — SPDR Barclays Capital High Yield Bond ETF (NYSEArca: JNK) and iShares iBoxx High Yield Fund (NYSEArca: HYG) — lost 13% and 6% of their assets, respectively.
“Thanks to inflows in the week ended June 13, JNK now has a 7% outflow over the past four weeks instead of 13%, and HYG has lost 5% instead of 6%,” according to the report.
The spread on high-yield bonds relative to comparable government debt is nearly 7 percentage points.
“About $17.5 billion of investor money has flowed into junk-bond funds and ETFs this year, a pace that, if it were continued, could set a record for inflows across the full year despite recent outflows. The year to beat is 2009, which year to date had $29.9 billion of inflows,” Dow Jones reported.
SPDR Barclays Capital High Yield Bond ETF
Full disclosure: Tom Lydon’s clients own HYG.