U.S. junk bond funds post largest withdrawals since December: Lipper
NEW YORK (Reuters) - Investors ratcheted down their exposure to higher-risk assets during the week ended Aug. 3, taking $2.5 billion from high-yield bond funds in what constitutes the largest weekly withdrawal for those funds since a massive December selloff.
The withdrawals shed light on the degree that declining oil prices and profit-taking are starting to weigh on some riskier markets even as investors hunt for financial assets - such as in emerging markets - which offer strong yields.
Several benchmarks for oil fell into a bear market in late July as U.S. crude prices posted their worst monthly loss in a year, though prices have since rebounded somewhat.
Despite oil's woes, energy-heavy junk bond indexes have managed to maintain strength. The bonds have rallied since oil hit a more than 10-year low in February.
"You see money going on the sidelines, waiting to see how things are going to shake out," said Pat Keon, research analyst for Thomson Reuters Lipper.
The latest week's fund outflows were the largest for so-called junk debt since the week that ended Dec. 16, when the funds posted $3.8 billion in outflows, as the drop in oil roiled markets. At that point, the average junk fund's bonds sank by more than 1 percent for two weeks straight, Lipper data shows.
U.S.-based stock funds posted $3.6 billion in overall withdrawals in the latest week, the data showed. Energy sector stock funds also posted their largest withdrawals since December, returning $470 million in cash.
New money flowed into low-risk assets.
U.S.-based money market funds took in $3.8 billion in the week, while funds invested in gold and other precious metals took in $838 million, according to Lipper.
Investors spared emerging markets their wrath, delivering $1.8 billion to stock funds focused on those economies and $613 million to emerging market debt funds.
The funds are seen as attractive by investors who see the stocks as priced cheaply and the debt as offering an all-too-rare opportunity to boost yields as central banks worldwide have pushed rates lower.
Investment-grade bond funds took in $2.5 billion, their fifth straight week of inflows. Overall, U.S.-based taxable bond funds posted $96 million in outflows during the same period, the research service's data showed, marking their first net withdrawals since June.
(Reporting by Trevor Hunnicutt; editing by Jennifer Ablan, G Crosse)
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