Friday, April 13, 2012

Year's first outflows from HY bond funds

It was only a matter of time before the extraordinarily strong inflows into high yield bond funds came to an end. This past week saw the first net outflows out of HY this year - about $1.4bn of outflows all in.

HY fund flows

Typically ETFs (such as HYG or JNK) have been the bigger drivers of HY flows recently. But this past week it's the mutual funds that dominated the outflows. Mutual funds are generally considered to be less of a "fast money" investor than ETFs, suggesting that the outflows maybe more enduring.

Source: EPFR

The JPMorgan HY index shows that spreads on HY bonds have widened out by some 35bp from the lows back in March. The days of US leveraged companies issuing BB bonds at 6.3% may be over for a while.

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