- Junk-Bond ETFs Shed $1.3 Billion in a Week as Rout Picks Up Pace
Investors pulled $1.3 billion from global exchange-traded funds that track high-yield bonds last week as doubts mount about the sustainability of a rally that has compressed yields to multi-year lows.
Funds that track dollar debt led losses, with the iShares iBoxx High Yield Corporate Bond ETF, ticker HYG, shedding $726 million for the week and the SPDR Bloomberg Barclays High Yield Bond ETF, ticker JNK, suffering its biggest daily loss in five years on Friday. European funds lost $44.2 million for the week, according to data compiled by Bloomberg.
Concerns are mounting that investors won’t be compensated for the risks of investing in bonds of companies with relatively fragile balance sheets if political risks rise or inflation accelerates. Even after a selloff last week, yields on junk bonds are still three percentage points below a two-decade average.
“With spreads tighter, the chance that investors earn their coupon is certainly lower than what it was a year or two ago,” Eric Stein, co-director of global income at Eaton Vance Corp., said in an interview with Bloomberg TV. “If we have an inflationary world with higher rates, or risk-off and deflationary world, that could be challenging for high-yield.”