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High-yield outflows – the end of a bad dream?

High-yield fund flows – flat on the week

After seven consecutive weeks of outflows from high-yield credit funds, last week EPFR data revealed that outflows have stopped and flows have been broadly flat. Flows have remained strong in high-grade credit and government bond funds highlighting the reach for perceived safety in a world of zero growth; aggregate YTD flows are now in excess of +$71bn. On the flip side outflows continued from European equity funds. Note that YTD flows into government bond funds (+$19bn) have now surpassed those into equities (+$17bn). EM bond funds have seen a second week of outflows.

Credit flows (week ending 22nd October)

HG: +$1.5bn (+0.2%) over the last week, ETF: +$332mn w-o-w
HY: -$1mn (-0.0%) over the last week, ETF: +$459mn w-o-w
Loans: -$104mn (-1.3%) over the last week

High-yield credit fund outflows seem to have stopped last week after a seven week string of outflows; YTD flows are now in negative territory. On the other side high-grade credit fund flows continued for the 44th week in a row, averaging more than $1.2bn per week. HY ETF flows seem to have reversed track after 3 consecutive weeks of outflows. Last week’s $459mn inflow was the highest ever according to EPFR data. However, loan funds have seen another weekly outflow, the sixth in a row.

Duration was favoured for another week with inflows concentrating to the mid and long-term high-grade funds. This highlights investors’ preference to extend duration in order to pick up yield.

Bank of America Merrill Lynch , October 2014

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Bank of America Merrill Lynch

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