U.S. junk bond sector ends rough week on calmer note

From Reuters - November 10, 2017

NEW YORK (Reuters) - Cracks in the red-hot U.S. high-yield bond market are starting to widen, with two junk-rated companies pulling their deals on Friday and U.S.-based high-yield funds suffering their second consecutive week of cash withdrawals.

Folks have become super negative on risk all of a sudden, said Greg Peters, managing director and senior portfolio manager at PGIM Fixed Income.

On Friday, coal producer Canyon Consolidated Resources became the second junk-rated company to pull a bond sale this week amid a bout of volatility in credit markets. NRG Energy pulled its junk bond offering on Thursday as spreads across the asset class widened sharply and the two main junk bond ETFs reached seven-month lows.

With the yield curve at its steepest level in over a week a day after it touched its flattest level in a decade, those junk bond ETFs recovered.

The U.S.-listed, $19 billion iShares iBoxx $ High Yield Corporate Bond ETF rose 0.22 percent at $87.11, while the $13.1 billion SPDR Bloomberg Barclays High Yield Bond ETF, gained 0.47 percent at $36.68.

Both funds shed about 1.0 percent on the week, for theirsteepest drop in three months.

Investors pulled $621.9 million from U.S. junk portfolios in the latest reporting week, following outflows of $1.2 billion the previous week, according to Lipper data.


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