U.S. Junk-Bond Funds See $2.3 Billion Inflow, Most Since April
U.S. Junk Bonds Are Back in Demand With Funds Poised for Inflows
(Bloomberg) -- Investors are rushing back into U.S. junk bonds with funds that buy the risky debt seeing the biggest inflows since April.
The funds received $2.3 billion of cash in the week ended Oct. 20, the biggest influx since the week ended April 7, according to Refinitiv Lipper data. It shows a shift in risk appetite following two straight weeks of outflows, including a $1.8 billion withdrawal last week, the most since June.
A jump in yields has made junk bonds more appealing after rising about 30 basis points since the start of September, closing at 4.16% Wednesday. Bill Zox, a high-yield bond portfolio manager at Brandywine Global Investment Management, said a rally in equities was also helping drive demand, while a better chance of generating positive inflation-adjusted yields compared to the investment-grade market is another factor.
![U.S. Junk-Bond Funds See $2.3 Billion Inflow, Most Since April](https://assets.bwbx.io/images/users/iqjWHBFdfxIU/i4_xLAhO0DOY/v2/560x-1.png)
“The value of the equity cushion is so high compared to the level of debt,” said Zox. “Rates have been increasing since September, leading to losses for investment-grade. That’s also made junk bonds more attractive.”
The Bloomberg U.S. Investment Grade Index in September suffered its worst monthly total return since March, posting a 1.05% loss as Treasury yields rose, and is down 0.64% so far this month. The Bloomberg U.S. High Yield Index, meanwhile, lost just 0.01% in September -- the first monthly negative return of the year -- and is down about 0.14% so far in October.
Read more: UBS Sees Corporate Bonds Headed for Steepest Loss Since 2008
Still, investment-grade debt is still attracting buyers. Funds that buy the debt saw investors add $3.84 billion during the same period after an influx of $881.9 million in the prior week.
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