An exodus from the junk bond market in the United States should be a warning to anyone holding shares in the UK.
The latest data from America show investors are dumping riskier debt faster than during the financial crisis in 2008. The money is rushing to safe havens such as US government bonds and gold. The staggering shift in investment strategy marks a reversal of the chase for returns that has been in place for five years.
High-yield bond funds and exchange- traded funds reported a record $8.2bn (£4.8bn) weekly outflow last week, according to the latest data from EPFR Global. The wall of money coming out of riskier assets exceeds the previous record single-week outflow (set during the June 2013 bond market sell-off) by about $2.5bn. The withdrawals are also larger than those recorded at the height of the global financial crisis.
The retreats from high-yield bond funds have been accelerating and the latest data show the fifth straight week of billion-dollar outflows, with an average outflow of $3.15bn during the past month. Lipper, the fund-management analysis company, shows about 20pc of withdrawals came out of exchange-traded funds, with the remaining 80pc coming from mutual funds.
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