REPORT: Investors withdrew $6.3 billion from U.S. junk bond funds
How did your stock portfolio and mutual funds fare during last week’s volatile sessions? It was a roller coaster ride, and it is likely just a glimpse into the near future.
But it was so bad that a particular market took quite the beating: junk bonds.
According to Bloomberg, investors sold $6.3 billion from U.S. high-yield junk bond funds, which is the second-largest amount in history – the biggest, $7.06 billion, occurred in August 2014.
In total, it was the fifth straight week of outflows, as more than $15 billion worth of junk bonds have been withdrawn. This represents the longest consecutive period, and it could be a sign of things to come.
It was also reported that U.S. government mortgage funds posted outflows of $182 million, U.S. corporate investment-grade funds experienced outflows of $790 million, and municipal-bond funds witnessed outflows of $443 million.
Henry Peabody, a money manager at Eaton Vance Corp., told the business news network:
“The narrative is really becoming more about inflation and rate risk creeping into the broad markets. Investors are likely to hit the silk fairly quickly.It’s hard to think of elevated volatility in both rates and equity not eventually seeping into credit. Investors are waiting for the markets to settle down.”
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