US high-yield funds post biggest inflow since November amid risk-on tone

Against a backdrop of declining risk premiums, U.S. high-yield funds attracted potent inflows over the first week of the second quarter, lifting the four-week moving average into the black for the first time this year, according to Lipper.

The inflow for the week to April 7 amounted to $3.81 billion, representing the biggest inflow since the week to Nov. 11, 2020 ($4.57 billion). Inflows were also above $4 billion for the first week of the fourth quarter last year, at $4.01 billion for the period to Oct. 7, 2020. Those big opening flows compared with a $196.2 million outflow to start the first quarter this year, one of nine weekly net redemptions over the 13 weeks of the first quarter.

The big number over the latest week built on a milder $809.2 million inflow for the last week of March, and the combination left the four-week average at positive $912.5 million. That marked the first positive reading for that moving average since the week ended Dec. 9, 2020. The year-to-date net outflow moderated to $7.23 billion, following last year's $38.3 billion of net inflows.

The influx for the first week of April reflected $1 billion of inflows to mutual funds and $2.8 billion of inflows to high-yield exchange traded funds per funds that report weekly to Lipper. For mutual funds, it was the first week of inflows after 10 straight net redemptions.

Assets at the U.S. high-yield funds reporting to Lipper totaled $278.27 billion as of April 7, $76.89 billion of which is at ETFs.

The ample purchases at the start of the quarter came as high-yield risk premiums continue to dive lower in the face of brightening economic indicators. The average option-adjusted spread across LCD's 15-bond sample of liquid high-yield issues narrowed to T+277 as of April 8, marking a new pandemic-era low. For the broader S&P U.S. High Yield Corporate Bond Index, the T+306 spread at the April 7 close was tighter by roughly 40 bps over the last three weeks and down from T+356 at the start of this year while also marking a new low since January 2020.