Watch that space: High Yield Bond funds show significant outflows

Zerohedge has an interesting article bout high yield bond outflows: recent weeks have seen the longest streak in daily outflows from high yield bond funds. As one would assume, this has led to an increase in spreads albeit less than one would expect given the size of the outflows.

Regular readers will know that I believe there is a link between frothy credit markets and the stock market via buybacks (most recent links: here and here). Consistent with this view, the recent sell off in credit has led the ( very small) correction in equities, as can be seen in the chart below:


So far nothing has happened yet, the moves depicted have been small and investors have not suffered major pain. If the outflows continue at this pace, however, this could mark the beginning of the next great unravelling…



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