High-yield bond funds see $2.28 billion outflow in third straight cash redemption

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High-yield U.S. retail funds reported a substantial outflow for a third straight week, driving the four-week moving average to its deepest reading in the red since February, Lipper data showed. The $2.28 billion outflow for the week to September 7 builds on a cumulative outflow of $9.6 billion over the previous two weeks.

The $11.9 billion outflow from the funds in the past three weeks marks the largest outflows in any comparable period since March 2020. The exodus left the year-to-date net outflow of weekly reporters in Lipper to $38 billion, plus $13.03. billion outflows in 2021, compared to an inflow of $38.3 billion in 2020.

The four-week moving average, which incorporates an inflow of $1.5 billion for the week through August 17, moved to negative $2.6 billion from negative $2 billion in the prior week. and compared to a 2022 nadir for this metric of negative $3.1 billion for the four weeks to Feb. 16. Flows have drastically tipped from a four-week average of $2.3 billion positive on four consecutive weekly inflows through August 17.

High-yield ETFs led the latest move, with $1.6 billion leaving the funds, driving outflows from the category to $20.7 billion so far this year. In the meantime. investors withdrew $714 million from mutual funds for the week, increasing the category’s net outflows in 2022 to $17.2 billion.

The value of Lipper’s Weekly Reporter assets fell for a third straight week, to $220.8 billion, from $239.9 billion at the Aug. 17 reading. The 2022 low is $217.8 billion, recorded on June 29, from $282.4 billion in the final reading of 2021.

The rapid decline in fund valuations reflects both the three consecutive large fund redemptions and the four consecutive weeks of declines linked to market-related losses. The change in fund value due to market conditions was negative $267 million net last week, resulting in a cumulative market-based loss of $7.6 billion over the past four weeks . Markets have now moved against high yield fund assets to the tune of $27.4 billion so far in 2022, following a net gain of $14.3 billion in 2021.

For reference, the S&P US High Yield Corporate Bond Index price was 88.15 at the September 7 close, down slightly from 88.44 a week earlier, and from 91.38 on August 17. . The index’s worst-case yield rose six basis points. over the past week, at 8.28%, compared to 7.42% on August 17.

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