Tidal Wave of Junk Bond ETF Outflows

Inflation and uncertainty over future interest rate moves by the world’s central banks are causing junk bond investors to flee for the exits. Over the last week a wave of money has exited the junk bond market. The chart above displays the outflows from junk bond ETFs HGY and JNK. After I wrote to you yesterday, investors pulled money out of of junk bond ETFs yet again. The Wall Street Journal’s Chris Dieterich writes:

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The bond market’s October retreat fueled record withdrawals from some popular exchange-traded funds, the latest sign of investor anxiety over inflation.

Investors pulled $998 million last Thursday from the oldest and largest junk-bond ETF. That is the largest daily withdrawal on record, said BlackRock Inc., the ETF’s provider.

Investors also pulled $1.7 billion last week from the the biggest weekly outflow since its inception in 2002.

The redemptions coincided with a global rout in government bonds that sent the yield on the 10-year U.S. Treasury note to its highest levels since late May. On Tuesday, the 10-year Treasury yield fell to 1.822%, as prices rose.

Bond investors are bracing for an interest-rate increase from the Federal Reserve and grappling with signs of rising inflation, which erodes the fixed value of bond payouts over time, in the U.S. and globally.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.