The FT reports on the sell-off in the $1.3 Trillion high-yield bond market. We wrote about the shifting landscape in the high-yield bond market last week. The high-volume sell-off in junk bond ETFs is continuing. High-yield bonds are on pace for their worst month since January of 2016, the month of the last major stock market correction.
Even if you don’t invest in high-yield bonds, the market should be watched closely as it can be a harbinger of things to come in equity markets.
Junk-rated debt has already lost 1.1 per cent in value so far during November, on pace for its worst month since January 2016, according to ICE BofA indices. The selling pressure, which is so far restricted to a few companies and sectors, is testing the resolve of investors who over the past 20 months have only experienced three down months, each with losses of less than 0.4 per cent.
Gains by closely followed exchange traded funds have also been erased for the year, with both State Street’s $13bn high-yield ETF, which trades under the ticker JNK, and BlackRock’s $19bn iShares HYG fund sitting at seven-month lows.
Read more here (subscription required).
Jeremy Jones, CFA
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