Managed Money Moves Back into High Yield Corporate Bonds

Managed Money Moves Back into High Yield Corporate Bonds

US fund investors charged into high-yield corporate bonds during the latest week, shoveling $3.3-B, the most cash flowing into that market since late Y 2016, Lipper said Thursday, boosted by dovish words from Fed Chairman Powell.

Underscoring investors’ appetite for some risk-taking, investors pulled $15-B net cash from US-based money market funds, according to the Refinitiv research service.

US-based equity mutual funds, which exclude ETFs (exchange-traded funds) posted inflows of $4.8-B, Lipper data showed.

“From this week’s results, it appears that fund investors are encouraged by what they’ve seen and heard from the equity markets, the Fed and economic data, and are willing to take on more risk,” the senior research analyst at Lipper said in his note.

Last week, Chairman Powell reiterated that the Fed plans to evaluate the health of the economy before moving ahead with any new interest rate increases.

The $15-B net outflow from money markets “indicates that investors are taking money off the sidelines and putting it back to work as well as the net inflows into below investment- grade debt funds – high-yield funds and high-yield muni funds.

“The outflows from Loan Participation funds are a long-term trend starting in the early part of Q-3,” he said. The peer group has been hurt by the Fed’s slowing its pace of rate hikes, as bank loans are floating rates.

“It’s possible the sector was overbought as well as prior to the downturn at the start of Q-4, they had net inflows in 34 of the prior 35 weeks,” he said.

Energy sector stock funds recorded $1.3-B in outflows in the same week, the largest withdrawals since October 2014, even as Crude Oil prices edged off the 1.5 year lows marked last month.

The cash withdrawals for energy sector funds were concentrated mostly in 2 ETFs: SPDR S&P Oil & Gas, with $641-M of net cash outflows, and Energy Select Sector SPDR, with $576-M of net cash outflows, it was noted.

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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