http://www.zerohedge.com/news/2015-12-17/markets-brace-more-fund-liquidations-junk-investment-grade-and-loan-fund-outflows-so
As Bloomberg reminds us, the average yield on junk bonds jumped to more than 9 percent on Dec. 14 for the first time since 2011, according to Bank of America Merrill Lynch indexes. And yet despite endless laments that there is "not enough yield", investors couldn't get out fast enough. It appears investors aren't "starved for yield"... they are simply "starved for safety in numbers."
"The negative headline feeds upon itself," Ricky Liu, a money manager at HSBC Global Asset Management told Bloomberg. "And if you are in a poorly performing retail fund, there is also the concern that there could be more pain to follow. The commodities space is still a pretty big part of high yield and there is no relief there yet."
But the one category that was certainly the most interesting, is the one we highlighted earlier today when we said "the one asset class that has so far slipped through the cracks, but which will be very closely scrutinized in the coming weeks now that rates are rising: leveraged loans." The reason: the underperformance in leveraged loans so far this year is on par if not worse than that of junk bonds.
The bottom line: as new investor liquidity evaporates and as billions are redeemed first from the junk bond universe, then investment grade and then loans, the debt crisis which was unleashed in anticipation of the Fed's rate hike, is about to get much worse, and lead to even more prominent hedge fund "gates" and liquidations, while in the equity space, the lack of Investment Grade dry powder means that buybacks are about to grind to a halt.
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