BANK OF AMERICA: IT'S BOND CARNAGE
They pulled billions from the debt markets in the week the US Federal Reserve raised interest rates for the first time since the 2008 financial crisis, according to a report from Bank of America Merrill Lynch.
BAML analysts, led by Michael Hartnett, called it "carnage." Bond funds saw $13 billion (£9 billion) in outflows this week, the most since June 2013.
It was even worse for funds that invest in bank loans - they had their worst week since 2011.
Here's the chart:
Riskier bonds, known as high-yield bonds because of the enormous interest payments, continued their losing run. Here's BAML (emphasis ours):
US HY recorded -$3.05bn (-1.50%) net outflows last week, their 2nd consecutive $3bn and -1.5% outflow. In the past 10 years, US HY has suffered consecutive losses of this magnitude 4 times, the last occurrence being June 2013.
The near-$2 trillion (£1.32 trillion) market for risky high-yield bonds has imploded this month and taken a few funds with it.
On Monday, Lucidus Capital Partners liquidated its entire portfolio to return the $900 million it had under management to investors, and last week closure of the Third Avenue Focused Credit fund spooked the market.