Global investors yanked the second-highest weekly amount from high-yield bond funds in the past year, as a commodities selloff leaves some companies struggling to repay debts.
About $4.9 billion was pulled from speculative-grade debt funds in the week ended Jan. 20, according to a Bank of America Corp. note to clients, citing EPFR Global data. A further $1 billion was taken out of investment-grade bond funds. By contrast, $5.1 billion was put into government-bond funds, the most in almost 12 months.
“I am worried about these outflows,” said Mahesh Bhimalingam, head of European credit strategy at BNP Paribas SA in London. “Global credit is in an uneasy position.”
Investors are shunning risky assets as a slowdown in China, the world’s second-biggest economy, helps push raw-materials prices to near 25-year lows. Moody’s Investors Service has put credit ratingson review for dozens of energy and mining companies after cutting its 2016 crude-price forecast and seeing a “fundamental shift” in markets that will strain miners’ cash flows.
Crude’s decline to around $30 a barrel has particularly affected the U.S. junk-bond market, as energy companies make up 10 percent of issuance, based on Bank of America Merrill Lynch index data.
Oil company Pacific Exploration & Production Corp. and zinc-recycler Horsehead Holding Corp. are among five issuers to have defaulted this year, according to Standard & Poor’s.
EPFR Global tracks $415 billion of high-yield bond funds, Bank of America said by e-mail.
The average yield on corporate junk bonds worldwide reached 9.4 percent on Wednesday, the highest since 2011, the data show. The notes have lost 3.3 percent this year, on a total-return basis, following a 2.1 percent loss in 2015.
Global investors withdrew $5.3 billion from speculative-grade bond funds in the week ended Dec. 16, Bank of America said last month.