U.S. corporate bond ETFs are moving toward their second consecutive month of outflows, the first such period of weakness in the past seven years. For instance, LQD experienced its single worst day of losses last week since 2016 while HYG is still in the midst of its biggest two-month outflows on record.
Over the past two months, LQD saw $1.968 billion in net outflows and HYG experienced $2.628 billion in redemptions.
“It looks like constituents – either maturity, credit or liquidity differences between the two markets – have played a role, but there does seem to be a general weakening of ETFs relative to the market,” Thomas Tzitzouris, fixed-income research chief at Strategas Research Partners, told Bloomberg. “At a high level, we believe that high-yield is running into resistance.”
Meanwhile, spreads in junk- and investment-grade bonds are hovering near their tightest since 2007 even after high-yield premiums rose slightly.
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