US high-yield funds report $1.96B outflow ahead of torrid CPI report

U.S. high-yield retail funds reported outflows of $1.96 billion for the week ended Feb. 9, marking a fifth consecutive heavy redemption from the funds, according to Lipper. The latest report followed a $4.04 billion outflow the previous week, or the largest single-week rush for the exits since March 2021.

The four-week rolling average moderated only slightly to negative $2.74 billion through the latest week, from negative $2.81 billion through Feb. 2. For the year to date, net outflows now total $13.19 billion, already more than the $13.03 billion of outflows for all 2021 and a stark reversal from the $38.3 billion of inflows for all 2020.

Dollars flowed out of both major fund categories for a fifth straight week. Mutual funds saw outflows of $1.14 billion for the week to Feb. 9, while $822 million exited U.S. high-yield exchange-traded funds.

Assets at the weekly reports to Lipper totaled $267.4 billion at Feb. 9, $71.3 billion of which is at ETFs, or 27%. Assets are down from $282.4 billion on Dec. 29, 29% of which was at ETFs.

The markets moved against those assets for a sixth straight week in 2022. The change due to market conditions was negative $2.03 billion for the latest week, representing the most severe market move since the week to Oct. 28, 2020, when credit markets tottered in the lead-up to the Nov. 3, 2020, presidential election.

Note that the latest observation period does not capture the additional heavy pressure on prices on Thursday, after another scorching inflation report via the January CPI data, and emphatically hawkish comments from the Fed's James Bullard in its wake. The average bid for LCD's 15-bond sample of liquid high-yield issues tumbled 103 bps over the week to Feb. 10, to 99.04% of par, versus 100.07 on Feb. 3. The latest full-handle slide extends a decline from 103.92 at the final reading of 2021, on Dec. 30, and it adds more distance from the 104.49 level at the first reading of the fourth quarter last year, on Oct. 7. It also marked the first flow-name reading below par since May 2020.

Also, the price for the broader S&P U.S. High Yield Corporate Bond Index touched 99.90 on Feb. 7, marking a low since July 2021, when the index price last closed below par.