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11/17/17

US Stock Market: Investors flee junk bonds in troubling signal for stock market - Jeff Cox

udging from the flow of money out of high-yield bonds, investors are getting increasingly leery of a market that continues to hover around record levels, despite a handful of rough trading sessions in November and a rocky start Friday.

Funds that track junk bonds saw $6.8 billion of outflows over the past week through Wednesday, according to Bank of America Merrill Lynch. That's the third-highest on record.

The sector is considered a key proxy for the stock market, with performance that has followed almost a perfect correlation with the S&P 500 in terms of direction. Bonds are normally thought as a safe-haven trade that benefits when stocks weaken, but high-yield represents a risk similar to equities.

The correlation in 2017 has varied: September was the high for the year at 76 percent, while June was just 42.4 percent, according to DataTrek Research. (100 percent would mean the assets move exactly in tandem.)

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