US junk-bond funds post inflow of $ 2.3 billion, most since April

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(Bloomberg) – Investors are rushing into US junk bonds with funds buying risky debt, seeing the biggest inflows since April.

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The funds received $ 2.3 billion in cash during the week ended October 20, the largest inflow since the week ended April 7, according to data from Refinitiv Lipper. It shows a change in risk appetite after two straight weeks of cash outflows, including a $ 1.8 billion withdrawal last week, the highest since June.

A surge in yields made junk bonds more attractive after rising around 30 basis points since early September, closing at 4.16% on Wednesday. Bill Zox, high yield bond portfolio manager at Brandywine Global Investment Management, said a rally in stocks is also helping to boost demand, while a better chance of generating positive inflation-adjusted returns by Another factor is market quality.

“The value of the capital buffer is so high relative to the level of debt,” Zox said. “Rates have increased since September, causing losses for the investment grade. It also made junk bonds more attractive.

The Bloomberg US Investment Grade Index posted its worst monthly total return since March in September, posting a loss of 1.05% as Treasury yields rose, and is down 0.64% so far this month -this. The Bloomberg US High Yield Index, meanwhile, lost just 0.01% in September – the first negative monthly return of the year – and is down around 0.14% so far in October.

Read more: UBS sees corporate bonds heading for biggest loss since 2008

Yet investment grade debt continues to attract buyers. Funds that buy the debt saw investors add $ 3.84 billion in the same period after an inflow of $ 881.9 million the week before.

(Updates with final issues in second paragraph.)

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