With high-yield corporate bond ETFs diverging from the S&P 500, a scenario that implies the credit market may not be confirming the latest move higher in stocks, some investors are growing apprehensive about the largest high-yield bond ETFs.

For the third consecutive week, the iShares iBoxx High Yield Corporate Bond (NYSEArca: HYG) and SPDR Barclays High Yield Bond (NYSEArca: JNK) closed lower. HYG and JNK are the two largest junk bond ETFs, with over $29 billion in combined assets under management. However, investors are pulling cash from the two ETFs even as primary dealers are increasing their exposure to high-yield bonds.

“The 21 primary dealers that do business with the Federal Reserve increased their net positions in junk-rated debt by 37 percent to $7.7 billion in the two weeks ended May 15, the highest since the central bank started reporting more detailed holdings data for the period ended April 3,” Lisa Abramowicz reported for Bloomberg.

Buoyed by dollar-depressing quantitative easing, ETFs such as HYG and JNK have gained favor with yield-starved investors over the past few years. The catch-22 is that junk bond yields have plunged more than 1,300 basis points since 2008. [High Yield Bond ETFs Down For Third Straight Week]

HYG, JNK and rival funds have risen slightly this year, but there has been ample speculation about the alleged demise of longer duration junk bonds. Duration is a measure of a bond’s sensitivity to interest rate changes. Bearish bets against high-yield bond ETFs hit record levels in March and now flows data indicate investors are pulling cash from HYG and JNK. [Credit Traders Help Drive Record Short Interest]

Since the start of May, HYG, the large of the two ETFs, has seen outflows of $419 million. JNK has lost $426 million, according to Index Universe data.

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