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Junk-bond funds see outflows as record cash pours into high-grade

Buyers yanked $2.9 billion from junk bond funds for the week ended Jan. 29, nearly wiping out gains of the $3.6 billion added so far this year, according to Refinitiv Lipper data.
Buyers yanked $2.9 billion from junk bond funds for the week ended Jan. 29, nearly wiping out gains of the $3.6 billion added so far this year, according to Refinitiv Lipper data.
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Investors pumped the brakes on U.S. high-yield credit funds as markets grappled with ramifications of the human and economic fallout from the coronavirus. More than $23 billion was added to high-grade bonds this month.

Buyers yanked $2.9 billion from junk bond funds for the week ended Jan. 29, nearly wiping out gains of the $3.6 billion added so far this year, according to Refinitiv Lipper data. This week marked the biggest withdrawal since the week ended Aug. 7 when investors pulled more than $4 billion.

Investment-grade buyers meanwhile added $4.4 billion, bringing January’s haul to $23.4 billion, in what is one of the biggest months ever for inflowing cash.

“There is a structural bid in the IG market and that will remain the case,” Goldman Sachs’ Chief Credit Strategist Lotfi Karoui said during an interview at Bloomberg‘s New York offices on Thursday before the data came out. “The recent selloff in high-yield was really a beta issue.”

In what was a stellar year for corporates, governments nearly missed the list entirely.
January 8

The chill from the virus, which has been seen in travel companies such as air and cruise lines, has also dampened new debt sales. Just over $10 billion has priced against estimates of as much as $25 billion. Still, heavy issuance earlier this month propelled January to the second highest for that month on record.

Investors pulled close to $1.4 billion from the biggest junk-bond ETF (HYG) on Friday, the largest on record. It was the busiest month for new high-yield bond sales in a decade, with about $36 billion pricing. — Additional reporting by Gowri Gurumurthy, Michael Gambale and Rizal Tupaz

Bloomberg News