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After Big Inflow, US High Yield Funds See $3.1B Investor Cash Withdrawal

high yield bond flows

U.S. high-yield funds recorded an outflow of roughly $3.1 billion for the week ended Jan. 17, according to weekly reporters to Lipper only.

This week’s outflow follows an inflow of $2.65 billion last week, and puts the total outflow so far this year at about $238 million.

ETFs accounted for roughly $2 billion of this week’s outflow, while $1.1 billion exited mutual funds.

The four-week trailing average swung to negative $120 million, from positive $371 million last week.

The change due to market conditions this past week was an increase of $316 million. Total assets at the end of the observation period were $208.8 billion. ETFs account for about 24% of the total, at $50.8 billion. — James Passeri

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US High Yield Funds See Massive $4.4 Billion Cash Withdrawal

US high yield fund flows

U.S. high-yield funds recorded an outflow of $4.4 billion for the week ended Nov. 15, according to weekly reporters to Lipper only.

Mutual funds made up the bulk of this week’s outflow, at $2.6 billion, while $1.8 billion exited ETFs.

The year-to-date total outflow is now roughly $13 billion, with a $14.7 billion outflow from mutual funds outweighing a roughly $1.7 billion inflow to ETFs.

The four-week trailing average is in the red for the third straight week, widening to negative $1.5 billion from negative $536 million last week.

The change due to market conditions this past week was a decrease of $1.9 billion. Total assets at the end of the observation period were $206.6 billion. ETFs account for about 24% of the total, at roughly $50 billion. — James Passeri

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US High Yield Funds See Cash Inflow Courtesy Big ETF Gain

high yield fund flows

U.S. high-yield funds recorded an inflow of $122 million for the week ended Oct. 25, according to weekly reporters to Lipper only. This comes on the heels of last week’s outflow of $450 million.

ETFs drove the action this week with an inflow of $530 million, while $407 million exited mutual funds.

The four-week trailing average fell to positive $321 million from positive $399 million last week, and has now remained in the black for six consecutive weeks.

The year-to-date total outflow is now $6.7 billion, with an $11.6 billion outflow from mutual funds outweighing a $4.9 billion inflow to ETFs.

The change due to market conditions this past week was a decrease of $216 million, snapping a streak of eight consecutive weeks of increases. Total assets at the end of the observation period were $215 billion. ETFs account for about 25% of the total, at $53.8 billion. — James Passeri

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Fridson: High Yield Bond Covenant Quality Hits All-Time Low

The covenant quality of high-yield new issues reached an all-time low in the third quarter, as measured by the FridsonVision series. Moody’s series, of which ours is a refinement, bottomed out in the second quarter. For reasons detailed below, the two series diverged in September, with FridsonVision’s showing minor improvement versus August’s reading, while the Moody’s series deteriorated slightly, month over month.

cov quality 3

To provide background, “Covenant quality decline reexamined” ($) describes how we modify the Moody’s CQ Index to remove noise arising from month-to-month changes in the calendar’s ratings mix. On average, covenants are stronger on triple-Cs than on single-Bs, and stronger on single-Bs than on double-Bs. Therefore, for example, if issuance shifts downward in ratings mix in a given month, without covenant quality changing within any of the rating categories, the Moody’s CQ Index will show a spurious improvement. We eliminate such false signals by holding the ratings mix constant at an average calculated over a historical observation period.

cov quality

The opposite of the effect described just above occurred in September (see chart below). As the double-B component expanded from 24.0% of all issues in August, to 38.2% in September, Moody’s series worsened from 4.54, to 4.59 (1 = Strongest, 5 = Weakest). Filtering out the impact of monthly variations in ratings mix, the FridsonVision series showed a similarly sized improvement from 4.59, to 4.55.

On a quarterly basis, though, the pattern was reversed. The FridsonVision series deteriorated from 4.37 in August to an all-time low of 4.44 in 3Q17. This series’ previous worst score was 4.38 in 1Q15. Meanwhile, the Moody’s series improved slightly from its all-time quarterly worst 4.49 in 2Q17 to 4.47 in 3Q17 (see chart below). That seeming improvement in covenant quality reflected an unusually heavy concentration of issuance in the double-B category in 2Q17 and a return to about an average concentration in 3Q17. – Martin Fridson

This analysis was excerpted from Marty’s regular weekly column, available to LCD News subscribers. 

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Investors Pour $967M into US High Yield Funds

US high yield fund flows

U.S. high-yield funds recorded an inflow of $966.8 million for the week ended Oct. 11, according to weekly reporters to Lipper only. This week’s result is the largest of the current four-week inflow streak and brings the total over that span to $2.9 billion.

ETFs led the way with $847 million, accounting for 88% of the total, while mutual funds recorded their largest inflow in five weeks, at $119.7 million.

With this result, the four-week trailing average rises to $727.7 million, the highest level since the first week of the year, from $462 million last week.

The year-to-date total outflow is $6.37 billion. A $4.52 billion year-to-date inflow for ETFs is far outweighed by $10.9 billion leaving mutual funds so far in 2017.

The change due to market conditions last week was positive $135.3 million, marking the seventh straight increase, the longest run since February. Total assets at the end of the observation period were $215.4 billion. ETFs account for about 25% of the total, at $53.4 billion. — Jon Hemingway

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US High Yield Bond Funds See $433M Investor Cash Inflow

high yield fund flows

U.S. high-yield funds this week saw a $433 million cash inflow from retail investors, following up on an $866 million inflow last week, according to Lipper.

This week’s gain puts the four-week moving average at $461 million, up from $284 million a week ago. ETFs are entirely responsible for the inflow, as investors poured $590 million into those entities this week, while withdrawing $157 million from high-yield funds proper.

The change due to market conditions was $137 million to the upside (a 0.7% increase); it is the fifth-straight gain from market conditions, totaling $2.2 billion over that span.

High-yield fund assets now total $213 billion, with $51.7 billion via ETFs, or 24% of the total. — Staff reports

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Investors Return to US High Yield Bond Mart with $641M Cash Infusion

high yield bond flows

U.S. high-yield funds recorded an inflow of $641 million for the week ended Sept. 6, according to weekly reporters to Lipper only. This comes on the heels of three consecutive weekly exits that combined for a total outflow of $3.5 billion over that span.

ETFs made up $364 million of the inflow this week, while $277 million flowed into mutual funds.

The four-week trailing average stayed in the red for a fourth straight week, narrowing to negative $709 million, from negative $838 million last week.

The year-to-date total outflow is $9.2 billion, with a $11 billion outflow from mutual funds offset by a $1.8 billion inflow to ETFs.

The change due to market conditions this past week was an increase of $1.1 billion. Total assets at the end of the observation period were $209 billion. ETFs account for about 24% of the total, at $50.1 billion. — James Passeri

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US High Yield Funds See $2.2B Investor Cash Inflow

U.S. high-yield funds recorded an inflow of $2.2 billion for the week ended July 19, the largest such inflow since the week ended April 5, when the total was $2.4 billion, according to weekly reporters to Lipper only.

US high yield fund flows

This inflow snaps four straight weeks of outflows from the asset class for a total outflow of $4.2 billion over that period.

ETFs made up the bulk of the inflow this week, at $2 billion. The $200 million inflow to mutual funds follows last week’s exit of $1.4 billion.

The four-week trailing average remains in negative territory for the fourth consecutive week, rising to negative $453 million, from negative $1 billion last week.

The year-to-date total outflow is $6.6 billion, with a $8.3 million outflow from mutual funds outweighing a $1.7 billion inflow to ETFs.

The change due to market conditions this past week was an increase of $1.3 billion. Total assets were $210 billion at the end of the observation period. ETFs represent about 24% of the total, at $49.7 billion. — James Passeri

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US High Yield Funds See Yet Another $1B-plus Investor Withdrawal


US high yield fund flows

U.S. high-yield funds recorded an outflow of $1.1 billion for the week ended July 12, according to weekly reporters to Lipper only. This is the fourth straight week of outflows from the asset class for a total of $4.2 billion over that period.

Mutual funds led the exit this week, with outflows of $1.4 billion outweighing inflows into ETFs of $276 million, following last week’s exit of $184 million from ETFs.

The four-week trailing average remains in negative territory for the third consecutive week, dipping to $1 billion, from $705 million last week.

The year-to-date total outflow is $8.9 billion, with an $8.5 billion outflow from mutual funds and a $319 million exit from ETFs.

The change due to market conditions this past week was an decrease of $33.9 million. Total assets at the end of the observation period were $206.3 billion. ETFs account for about 23% of the total, at $47.3 billion. — James Passeri

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Private Equity Companies Gamble on Oil and Gas Defaulters—S&P Global

Given the apparent bottoming out of the decline in oil prices, improving credit conditions in the oil and gas sector, and the favorable financing conditions across markets currently, many distressed oil and gas companies appear to be a high-return bet.

However, risks do exist, and adding more debt to these firms’ existing loads may prove costly if interest rates rise, if the larger U.S. or European economy dips into recession, or if oil prices once again decline, S&P Global Fixed Income Research warned in a report this week.

The drop in oil prices that began in the second half of 2014 was particularly hard felt among U.S.-based shale oil producers, as this relatively expensive extraction method proved unsustainable amid an approximate 80% drop in oil prices.

“The speculative-grade default rate has risen in recent years primarily due to disproportionate stress in the energy and natural resources sector, where oil and gas companies have been struggling with falling revenue due to lower oil prices,” said Diane Vazza, head of S&P Global Fixed Income Research.

Private equity defaulters story table 2 2017-07-11(1)Moreover, many recent defaulters in the oil and gas sector have gained extra funding sources via private equity companies taking out ownership.

Recovery prospects
In terms of recovery prospects, bond prices for defaulting U.S.-based firms with private equity ownership do show some interesting distinctions among sectors. In the energy and natural resources sector, the average bond prices leading up to default were generally lower than those in other industries. But these same firms’ average bond prices were generally higher a month after default.

Generally, favorable recent bond prices for the oil and gas segment are in line with or slightly better than historical recovery rates.

The full report can be found here ($). — Rachelle Kakouris

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