Investors Aren't Worried About The Great Rotation At All Right Now - Here's How We Know
After ditching junk bonds at a record pace in June on the news that the Federal Reserve might slow its asset purchasing program soon, investors are buying them back up at a record pace.
Junk bonds netted a record $5.4 billion of deposits last week while investors pulled $1.8 billion from investment grade, according to Bloomberg.
It's an indication that investors are preferring the yield of junk bonds over the stability of corporate or municipal bonds.
Relative yields on high-yield bonds globally were 511 basis points on July 26 compared with the all-time low of 233 in June 2007, Bank of America Merrill Lynch index data show. Spreads on investment-grade notes of 150 basis points are up from this year’s low of 132 on May 28.
The so-called Great Rotation — a concept that came to vogue earlier this year when investors poured money into equity funds stoking fears that bonds would see a mass exodus — has yet to materialize.