Investors stretching for yield have flocked to junk bond ETFs this year but now the flows are starting to reverse as the funds drop below their 50-day moving average for the first time since June on worries over the economy and U.S. fiscal cliff.
So far in November, investors have pulled $458.7 million from iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) and $107.7 million from SPDR Barclays High Yield Bond (NYSEArca: JNK), according to IndexUniverse data.
In fact, HYG saw record outflows on Tuesday with high-yield ETFs on track for their first down month since May, Bloomberg News reports.
Investors yanked $218.9 million from the BlackRock-managed fund yesterday, the biggest daily withdrawal in the five-year history of the largest high-yield ETF.
“The five largest junk-bond ETFs, which allow investors to speculate on the securities without actually owning them, have lost $1.97 billion of assets since Sept. 20 as investors wager that a four-year rally in the debt is running out of steam,” Bloomberg reports.
U.S. junk bonds were up about 13% year to date through October.
Junk bond ETFs invest in speculative grade corporate debt and carry higher yields to compensate investors for the risk. They have appealed to investors seeking income in a low-interest-rate environment.
Although high-yield ETFs have been popular this year, there are signs investors are growing wary of the asset class. [High-Yield Investors Moving Into Bank Loan ETFs]