Bloomberg News

High-Yield Bond Funds in the U.S. Have First Outflow of 2012

April 13, 2012

Investors withdrew $1.18 billion from U.S. high-yield, high-risk bond funds for the week ended April 11, the first outflow in more than four months, according to EPFR Global data.

The withdrawals were broadly based, with less than a third of the cut attributable to exchange-traded funds, according to Cameron Brandt, director of research at Cambridge, Massachusetts-based EPFR. Speculative-grade bond funds last had an outflow in the week ended Nov. 30, when they lost $940 million.

Investors are pulling money out of funds that purchase bonds that are rated below Baa3 by Moody’s Investors Service and less than BBB- by Standard & Poor’s amid renewed concern that the sovereign-debt crisis will hamper the global economic recovery.

“There’s certainly a degree of risk-off at the moment with Europe and the fact that the Federal Reserve has not been doing much to confirm another round of quantitative easing this year,” Brandt said in a telephone interview.

Redemptions from global high-yield bond funds for the week ended April 11 were $1.4 billion, the largest weekly outflow since the end of November, according to EPFR Global. Emerging- market debt and equity funds both posted outflows for the second week this year.

Perceptions that junk-bond prices had risen steeply as well as uncertainty about Spain’s financial situation caused the recent pullback, according to Martin Fridson, global credit strategist at BNP Paribas SA in New York.

“I would be very surprised to see an outflow of the same magnitude next week,” Fridson said in a telephone interview. “The tone has been a little better the last couple days.

To contact the reporter on this story: Heather Perlberg in New York at hperlberg@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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