U.S. Junk Funds See Second Biggest Outflow Of The Year

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US corporate high-yield bond funds experienced their second largest outflow of the year as worries about a recession mount, and as markets brace for Federal Reserve Chair Jerome Powell’s speech in Jackson Hole Friday.

Investors pulled $4.57 billion for the week ending Aug. 24, according to Refinitiv Lipper data, snapping four weeks of inflows. US investment-grade bond funds also saw outflows with investors pulling $806 million from mutual funds and exchange-traded funds.

Corporate bonds are in a bit of a rut as investors dump holdings after a summer rally. Money managers will be watching Powell’s speech closely for clues on the path of rate hikes going forward. While some signs have emerged that inflation has reached its peak, Fed officials stressed the need to keep increasing rates.

Junk-bond yields increased for six straight trading sessions before sticking at 8% on Wednesday, a four-week high. Spreads, meanwhile, widened to 447 basis points with CCC rated debt approaching a risk premium level that’s considered distressed.

US leveraged loan funds, meanwhile, saw a $987 million outflow following a $123 million inflow the prior week. 

This article was provided by Bloomberg News.

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