U.S. fund investors pull most cash from ‘junk’ in two months: Lipper

NEW YORK (Reuters) – U.S. fund investors pulled $3.1 billion from high-yield “junk” bonds during the latest week, Lipper data showed on Thursday, offering new warning signs about risk appetite despite global markets’ continuing triumph.

The junk bond withdrawals – from both mutual funds and exchange-traded funds (ETFs) during the week ended Wednesday – mark the largest of any week since November, according to the research service.

High-yield bond funds invest in corporate debt with the lowest credit ratings, meaning they are seen as a more speculative or risky bet than most bonds.

“Most of the time we see equity markets rising and also high yield rising,” said Tom Roseen, head of research services for Thomson Reuters’ Lipper unit.

“There is a reason to be concerned.”

Stocks and high-yield bonds often trade in sympathy with one another, and high-yield bonds are sometimes seen as predicting what stocks will do next.

SPDR Bloomberg Barclays High Yield Bond ETF is positive for the year, but is off more than half a percent from its high earlier this month.

The bonds’ decline comes even as other risky assets, including global stocks, have been thriving this year.

“JNK has been below its 200-day moving average every day but one since Nov 1st! Amazing, given SPX is up almost 9% since then,” DoubleLine Capital LP Chief Executive Jeffrey Gundlach said Thursday on Twitter, referring to the junk bond ETF.

But junk bonds trade within a range, or spread, of lower-risk debts, leading some managers to say their ability to appreciate further is limited. U.S. bond yields have marched higher since September, pushing prices lower. The 10-year Treasury benchmark hit 2.63 percent on Thursday, the highest in 10 months, having hit 2.02 in September.

Janus Henderson Group plc fund manager Bill Gross told Bloomberg News last week that he had gone negative on high-yield bonds.

Gross has described the bond market generally as being in a bear market, but investors remain confident in other sectors.

Stock and bond funds based in the United States took in money overall during the week, with equities attracting $9.1 billion, taxable bonds taking in $2.5 billion and municipal bond funds reeling in $1.2 billion, Lipper said. The data covers U.S. -based funds.