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:

CreditSpreadsleading

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…

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s