High-Yield Funds Go Bananas as Junk-Bond Rout Worsens

Why the Junk-Bond Rally Appears to Be Unraveling

As U.S. markets swim in sea of red, trading in the largest high-yield exchange-traded funds has skyrocketed to dizzying levels.

The iShares iBoxx High Yield Corporate Bond ETF, Blackrock Inc.’s $18.7 billion fund, saw volume spike over five times higher than its average level at 1:19 p.m. in New York, according to data compiled by Bloomberg.

At more than 23.8 million shares, trading in the largest junk-bond fund has already surpassed its one-day average of 11 million for the past year -- outpacing volume notched in August amid saber-rattling between the U.S. and North Korea.

The delay in the Republican tax plan has spurred a sharp selloff across growth-sensitive assets, with the S&P 500 heading for its worst slump since August.

The BlackRock ETF is at its lowest level since March, set for its third consecutive day of declines.

For the $12.6 billion SPDR Bloomberg Barclays High Yield Bond ETF, one or a few of the larger players account for an outsize share of trading, with volumes more than six times higher than normal for the current session. Within 30 minutes through 12:38 p.m., three block trades were executed that totaled $394 million, data compiled by Bloomberg show.

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