January 19, 2018 / 12:06 AM / a year ago

UPDATE 1-U.S. fund investors pull most cash from 'junk' in 2 months -Lipper

 (Adds details on funds, analyst quote, table, byline)
    By Trevor Hunnicutt
    NEW YORK, Jan 18 (Reuters) - U.S. fund investors pulled $3.1
billion from high-yield "junk" bonds during the latest week,
Lipper data showed on Thursday, offering new warning signs about
risk appetite despite global markets' continuing triumph.
    The junk bond withdrawals - from both mutual funds and
exchange-traded funds (ETFs) during the week ended Wednesday -
mark the largest of any week since November, according to the
research service.
    High-yield bond funds invest in corporate debt with the
lowest credit ratings, meaning they are seen as a more
speculative or risky bet than most bonds.
    "Most of the time we see equity markets rising and also high
yield rising," said Tom Roseen, head of research services for
Thomson Reuters' Lipper unit.
    "There is a reason to be concerned."
    Stocks and high-yield bonds often trade in sympathy with one
another, and high-yield bonds are sometimes seen as predicting
what stocks will do next.
    SPDR Bloomberg Barclays High Yield Bond ETF is
positive for the year, but is off more than half a percent from
its high earlier this month.
    The bonds' decline comes even as other risky assets,
including global stocks, have been thriving this year.
    "JNK has been below its 200-day moving average every day but
one since Nov 1st! Amazing, given SPX is up almost 9% since
then," DoubleLine Capital LP Chief Executive Jeffrey Gundlach
said Thursday on Twitter, referring to the junk bond ETF.
    But junk bonds trade within a range, or spread, of
lower-risk debts, leading some managers to say their ability to
appreciate further is limited. U.S. bond yields have marched
higher since September, pushing prices lower. The 10-year
Treasury benchmark hit 2.63 percent on Thursday, the highest in
10 months, having hit 2.02 in September.
    Janus Henderson Group plc fund manager Bill Gross
told Bloomberg News last week that he had gone negative on
high-yield bonds.
    Gross has described the bond market generally as being in a
bear market, but investors remain confident in other sectors.
    Stock and bond funds based in the United States took in
money overall during the week, with equities attracting $9.1
billion, taxable bonds taking in $2.5 billion and municipal bond
funds reeling in $1.2 billion, Lipper said. The data covers U.S.
-based funds.
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          9.059     0.13      7,089.975  12,147
 Domestic Equities         2.243     0.05      4,837.309  8,657
 Non-Domestic Equities     6.816     0.31      2,252.666  3,490
 All Taxable Bond Funds    2.479     0.09      2,657.100  6,061
 All Money Market Funds    -22.317   -0.83     2,662.960  1,035
 All Municipal Bond Funds  1.179     0.29      403.573    1,473
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Diane Craft)
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