ETF Investors Grow Wary of Junk Bond Rally

Speculative-grade debt exchange traded fund (ETF) investors may be calling it quits after a three-month rally in junk bonds.

The iShares iBoxx $ High Yield Corporate Bond ETF (NYSEArca: HYG) experienced 27.8 million share redemptions, or about $2.6 billion in outflows, over the past four days, the longest losing streak since oil bottomed out on Februar 11, reports Sridhar Natarajan for Bloomberg.

While not to the extent of HYG, the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK) also saw outflows of $245.7 million over the past week.

Related: Rising Corporate Defaults Could Keep a Lid on Junk Bond ETFs

The exodus comes after a rally in high-yield debt, with HYG up 7.5% and JNK 8.2% higher over the past three months, on a risk-on environment and rebound in crude oil prices – speculative-grade debt initially plunged along with oil prices on fears of rising default risks among energy producers.

However, with many anticipating slow economic growth for the year ahead, some are concerned about the future prospect of riskier corporate debt.

“We continue to make no secret of our distaste for corporate fundamentals,” Bank of America Corp. strategists led by Michael Contopoulos said in a note, projecting total returns in high-yield could be between zero and one percent.