U.S. 'junk' bond funds take in most weekly cash since 2016: Lipper

NEW YORK (Reuters) – Investors stormed back into the market for the riskiest corporate debt during the latest week, Lipper data showed on Thursday, pumping the most cash into U.S.-based, high-yield bond funds in over 16 months.

The resurgence in demand for high-yield bonds, which carry low credit ratings and are seen as speculative investments, bodes well for stocks still in the early days reporting their quarterly earnings to Wall Street.

Stocks and high-yield bonds often trade in sympathy with one another, and high-yield bonds are sometimes seen as an indicator of what stocks will do next.

Pat Keon, senior research analyst for Thomson Reuters’ Lipper unit, said investors are starting to take on risk in financial markets after bouts of volatility this year triggered by concerns about U.S.-China trade relations, inflation and rising rates – each of which seemed poised to derail nearly a decade of U.S. stock market gains.

U.S.-based “junk” bond funds took in $3 billion during the seven-day period through Wednesday, the largest weekly figure since December 2016.

“People are taking money off the sidelines and putting it into play,” in financial markets, said Keon.

Money-market funds, where investors park cash, recorded $34.9 billion in withdrawals during the week, the most since March 2016.

Demand from fund investors helped pushed bond yields downward – and prices upward – on the high-yield U.S. corporate debt.

Yields on junk bonds are near their lowest levels since the 2007 start of the global financial crisis, compared against low-risk bonds, according to statistics gathered by Intercontinental Exchange Inc.

Overall, taxable bond funds took in $6.3 billion and stocks took in $4.6 billion, Lipper said. Emerging-market equity funds, which attracted $1.3 billion during the latest week, are yet to post a single week of withdrawals this year.

Within stocks, energy sector funds posted $405 million in withdrawals after three straight weeks netting cash. Economic growth and higher oil prices would normally boost the equities, but S&P 500 energy sector stocks sport the highest price-to-earnings ratios based on profits Wall Street analysts expect over the coming 12 months, according to Credit Suisse Group AG.

Rate-sensitive real estate sector funds reeled in $208 million after three consecutive weeks of withdrawals, Lipper said.

The following is a breakdown of the flows for the week, including mutual funds and ETFs:

Sector Flow Chg Pct of Assets($ Count

($ blns) Assets blns)

All Equity Funds 4.595 0.07 6,994.738 12,111

Domestic Equities 3.289 0.07 4,704.833 8,598

Non-Domestic Equities 1.306 0.06 2,289.905 3,513

All Taxable Bond Funds 6.314 0.23 2,739.914 6,040

All Money Market Funds -34.902 -1.30 2,647.066 1,038

All Municipal Bond Funds -0.515 -0.13 400.823 1,458

Reporting by Trevor Hunnicutt; additional reporting by Kate Duguid; editing by Jennifer Ablan and G Crosse

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