Exodus From Junk Bond Funds Accelerates As Institutional Fear Rises

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November 3, 2016 12:00pm NYSE:HYG NYSE:JNK

junkThe outflows in HYG (iShares High Yield Corporate Bond) have piled on in recent sessions, now topping more than $2.2 billion that has vacated the fund thanks to redemption pressure.


Typically, larger outflows in this fund, coupled with sellers in competing ETF JNK (SPDR High Yield Bond) are a reflection of institutional investors taking some risk off of the table (or at least it is often viewed this way by observing market participants).

It is not just iShares’ High Yield Corporate Bond Fund that has seen some significant selling lately, but as we also mentioned earlier this week in this recap, LQD (iShares Investment Grade Corporate Bond) has likewise seen redemption flows, with a notable more than $2.1 billion exiting this fund as well. These are not “typical” flows in the fact that these are of abnormal, larger institutional block size.

LQD-2016-11-03

Finally, there has been some profit taking in UVXY (ProShares Ultra VIX Short-Term Futures ETF) after a run-up recently in the VIX. This is not surprising because we had pointed out well-timed buyers of this and related “Long Volatility” funds just several sessions back at lower levels, and amid very heavy trading volume in the space.

What these big-time outflows will mean in the medium and long term is yet to be determined, but the short-term message is very clear: high-yield debt is no longer in vogue, and investors are growingly fearful of rising volatility both in bonds and equities.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch
paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.

Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.


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