Junk Jitters: What's Behind the Exodus from High-Yield Bonds?

Junk Jitters - What's Behind the Exodus from High-Yield Bonds.jpg

For the one-week period ending on November 15, 2017, investors withdrew a net $4.43 billion from U.S. funds holding high-yield bonds (often called junk bonds) — the third largest exodus from such funds on record. The high-yield market stabilized over the next two days, but the mass sell-off rang alarm bells for some market analysts.

Large outflows from junk-bond funds are sometimes considered to be an indication of potential weakness in equity markets — a canary in the market coal mine. While this remains a concern, a closer analysis suggests that the recent sell-off may be more specific to high-yield bonds and their role in the current investment climate.

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