Junk Bond Funds Post Biggest Outflow in Seven Months
The US junk bond market has seen its biggest outflow in seven months, according to data from Lipper. The outflow of $1.2 billion in the week ended September 23rd was the largest since February.
Reasons for the Outflow
The outflow was driven by investors’ concerns about the potential for rising defaults in the junk bond market. The market has been under pressure since the start of the year, as the coronavirus pandemic has caused a sharp economic downturn.
The outflow was also driven by investors’ concerns about the potential for rising interest rates. The Federal Reserve has been keeping interest rates low in order to support the economy, but there are fears that the Fed may start to raise rates in the near future.
Impact on the Market
The outflow has had a significant impact on the junk bond market. The average yield on junk bonds has risen to 8.3%, up from 7.7% at the start of the year. This is the highest level since February.
The outflow has also had an impact on the prices of junk bonds. The average price of a junk bond has fallen to 97.3 cents on the dollar, down from 99.2 cents at the start of the year. This is the lowest level since February.
Outlook for the Market
The outlook for the junk bond market is uncertain. The market is likely to remain under pressure in the near term, as investors remain concerned about the potential for rising defaults and interest rates.
However, the market could start to recover if the economic outlook improves. If the economy starts to recover, then investors may become more willing to invest in junk bonds.
Conclusion
The US junk bond market has seen its biggest outflow in seven months, driven by investors’ concerns about the potential for rising defaults and interest rates. The outflow has had a significant impact on the market, with yields and prices both rising. The outlook for the market is uncertain, but it could start to recover if the economic outlook improves.