US high-yield retail funds post slim $27M inflow amid ongoing ETF demand

U.S. high-yield retail funds reported a modest inflow of $27.3 million for the week to Aug. 10, as capital leaving mutual funds all but canceled out ETF inflows, according to Lipper. The reading builds on back-to-back weeks of heavy inflows, and comes amid a broad-market rally this week spurred by a relatively mild CPI update.

The meager inflow nevertheless lifted the four-week rolling average to a 2022 high, at positive $1.73 billion, from positive $1.56 billion through Aug. 3, and $1.04 billion for the week through July 27. That rolling metric was in the red over the previous five weeks, and the pivot to inflows has left the latest positive reading at a high since August 2020.

The inflows over the last three weeks trimmed the year-to-date net outflow to negative $27.5 billion, which still represents a sharp reversal from the $38.3 billion inflow in 2020. The year-to-date outflow remains more than double the $13.03 billion of outflows for all of 2021.

The inflow for the latest week came as U.S. high-yield ETFs attracted $367 million — almost entirely offset by a $340 million exit from mutual funds. For the year to date, net flows are negative $15.7 billion for mutual funds (on top of $13.9 billion of outflows last year) and negative $11.8 billion for ETFs (versus a slim inflow of $842 million last year).

Along with ETF demand, ongoing positive market conditions boosted the value of the assets at the weekly reporters to Lipper to a nine-week high. At $239 billion, the asset value is up from $237.4 billion a week earlier, and versus the 2022 low at $218 billion on June 29. The assets were $282 billion at the final weekly reading of 2021.

The uptick in asset values reflected a positive $1.6 billion change due to market conditions for the latest week. That metric has been in the black now for six straight weeks, for a cumulative gain of $14 billion over that span, and marking the longest run in positive territory since 12 straight positive readings to Jan. 20, 2021. The year-to-date level remains in the red, at negative $19.8 billion, versus a positive $14.3 billion net change last year.  

For reference, the average bid for LCD's 15-bond sample advanced 70 bps to a 15-week high, at 91.77% of par as of Aug. 11, building on gains of 113 bps over the previous week, 108 bps for the week to July 28, and 258 bps for the week to July 21.

Meanwhile, the 91.65 price for the broader S&P U.S. High Yield Corporate Bond Index on Aug. 10 reflected a week-over-week gain of 45 bps. The S&P index closed on Aug. 10 at a yield-to-worst of 7.34%, and at an option-adjusted spread of T+402, down from recent peaks at 8.62% (June 30) and T+553 (July 5).