Inflation and uncertainty over future interest rate moves by the world’s central banks are causing junk bond investors to flee for the exits. Over the last week a wave of money has exited the junk bond market. The chart above displays the outflows from junk bond ETFs HGY and JNK. After I wrote to you yesterday, investors pulled money out of of junk bond ETFs yet again. The Wall Street Journal’s Chris Dieterich writes:
The bond market’s October retreat fueled record withdrawals from some popular exchange-traded funds, the latest sign of investor anxiety over inflation.
Investors pulled $998 million last Thursday from the oldest and largest junk-bond ETF. That is the largest daily withdrawal on record, said BlackRock Inc., the ETF’s provider.
Investors also pulled $1.7 billion last week from the the biggest weekly outflow since its inception in 2002.
The redemptions coincided with a global rout in government bonds that sent the yield on the 10-year U.S. Treasury note to its highest levels since late May. On Tuesday, the 10-year Treasury yield fell to 1.822%, as prices rose.
Bond investors are bracing for an interest-rate increase from the Federal Reserve and grappling with signs of rising inflation, which erodes the fixed value of bond payouts over time, in the U.S. and globally.
Latest posts by E.J. Smith (see all)
- Dividends are Vital. The Reason Why Is Compound Interest - March 24, 2017
- Vance Returns to Ohio to Create New VC Opportunities - March 23, 2017
- Can You Trust a Robo-Advisor with Your Money? - March 22, 2017