US high-yield funds post $ 1.1B outflow in Fed’s shadow; YTD outflows hit $ 28.2B

U.S. high-yield retail funds witnessed a fourth consecutive week of outflows through May 4, in the shadow of the Fed’s widely anticipated half-point rate hike on Wednesday. Outflows of $ 1.1 billion followed on a much slimmer $ 118 million outflow the previous week, deepening the four-week rolling average to negative $ 1.53 billion, from $ 1.18 billion through April 27, per data from Lipper.

For the year-to-date, outflows mounted to $ 28.2 billion, which compares outflows of $ 9.8 billion over the comparable period last year. For all 2021, outflows were $ 13.03 billion, versus inflows of $ 38.3 billion in 2020.

The latest redemptions included $ 809 million flowing out of mutual funds, and $ 293 million exiting US high-yield ETFs. For the year-to-date, outflows from the categories are $ 12.13 billion and $ 16.04 billion, respectively.

Assets at the weekly reporters to Lipper continued lower to $ 239.5 billion, from $ 242 billion a week earlier. The latest level marks a new low since May 2020, down from $ 282.4 billion at the final weekly reading of 2021, on Dec. 29.

The markets moved against that pool of assets for a fifth straight week, as rate volatility persisted on either side of the May 4 rate hike. The impact on valuations for assets due to market conditions was negative $ 1.43 billion for the last week, versus negative $ 2.58 billion over the previous week. Reflecting negative readings in 15 of the 18 weeks so far this year, the net change due to market conditions stands at negative $ 19.3 billion through May 4, versus gains of $ 7.3 billion for the same year-to-date period last year, and $ 14.3 billion for all of 2021.

Conditions did not improve after the FOMC statement, including heavy pressures on Thursday as Treasury yields surged higher again on concerns that the Fed may not be able to contain inflation with more half-point hikes. The average bid for LCD’s 15-bond sample of liquid high-yield issues declined 142 bps for the week to May 5, to 90.58% of par, nearly rivaling the 145 bps decline over the previous week, and driving the level to a new low since March 26, 2020.

The average bid tumbled for a fifth straight week, and for the 16thth time in the 18 weeks so far this year. The latest level compares with readings at 96.53 on March 31, and 103.92 at the final assessment of 2021, on Dec. 30.

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