Spooked clients junk investments in high-yield bonds

Spooked clients junk investments in high-yield bonds
Investors in junk bond funds withdrew $2.1B from the funds -- in a single day. As one portfolio manager sayd: 'There's clearly a panic going on in the market.'
AUG 05, 2011
By  John Goff
Intensifying concern over Europe's sovereign debt crisis and the potential spillover for the U.S. economy are creating “panic” in the junk-bond market, according to Pioneer Investment Management Inc.'s Andrew Feltus. Investors withdrew an unprecedented $2.1 billion from junk mutual funds globally on Aug. 9, research firm EPFR Global said. Relative yields on high-yield bonds, rated below Baa3 by Moody's Investors Service and lower than BBB- by Standard & Poor's, have soared to 730 basis points, the highest since 2009, while returns on the debt have declined 4.6 percent this month. “There's clearly a panic going on in the market,” Feltus, who oversees the $2.1 billion Pioneer High Yield Fund, said today in a Radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “Prices are at such a point that you can even survive a recession, but people aren't looking at the fundamentals. They're just looking at the technicals, and ‘get me out of here.'” Feltus's fund has declined 10.5 percent this month through yesterday, after climbing 17.6 percent in 2010, according to data compiled by Bloomberg. The extra yield investors demand to hold junk bonds instead of Treasuries has jumped 106 basis points, or 1.06 percentage points, since Aug. 5, when S&P stripped the U.S. government of its top credit grade. That implies defaults between eight and nine percent over the long term, while defaults currently are in the two to three percent range, Feltus said. “The volatility in the market's awful,” he said. “Right now you're trying to hang on.” --Bloomberg News--

Latest News

Why the off-channel comms problem is far from solved
Why the off-channel comms problem is far from solved

Despite a lighter regulatory outlook and staffing disruptions at the SEC, one compliance expert says RIA firms shouldn't expect a "free pass."

FINRA penalizes another broker dealer for social media miscues
FINRA penalizes another broker dealer for social media miscues

FINRA has been focused on firms and their use of social media for several years.

Advisor moves: LPL recruits Merrill alum, Raymond James adds defectors from Edward Jones and Janney
Advisor moves: LPL recruits Merrill alum, Raymond James adds defectors from Edward Jones and Janney

RayJay's latest additions bolster its independent advisor channel's presence across Pennsylvania, Florida, and Washington.

Cantor Fitzgerald to acquire hedge fund unit from UBS
Cantor Fitzgerald to acquire hedge fund unit from UBS

The deal ending more than 30 years of ownership by the Swiss bank includes six investment strategies representing more than $11 billion in AUM.

Navigating life’s big transitions for women clients
Navigating life’s big transitions for women clients

Divorce, widowhood, and retirement are events when financial advisors may provide stability and guidance.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave

SPONSORED The evolution of private credit

From direct lending to asset-based finance to commercial real estate debt.