(Reuters) – U.S.-based high-yield junk bond funds posted greater than $four billion of outflows within the week ended Wednesday, the largest weekly money withdrawals since October 2018, in response to Refinitiv’s Lipper knowledge, triggered by an escalating commerce warfare between China and the United States.
Investors scrambled into safer U.S.-based money-market funds, which attracted $64.66 billion within the week ended Wednesday, the fifth largest weekly influx on report since 1992, Lipper stated.
Late Sunday, China let the yuan breach the important thing 7-per-dollar degree for the primary time in additional than a decade and introduced it was stopping its purchases of U.S. agricultural merchandise, halting a worldwide rally which had pushed benchmark indexes within the United States and China up greater than 20% for the yr so far.
It was the newest salvo in a brewing trade-turned-currency struggle between the world’s two largest economies.
“Lower rates aren’t good for money market funds, but the flows this week represented a flight to safety,” stated Tom Roseen, head of analysis providers at Lipper. “Investors were just looking for a good place to hide.”
Roseen stated there have been “significant outflows” for fairness exchange-traded funds (ETFs) this week at -$22 billion, marking their second-largest weekly outflows on document since 1996.
“Interestingly, despite the 10-year Treasury yield closing at 1.71% yesterday – its lowest closing value since November 4, 2016 – authorized participants and ETF investors were net redeemers of taxable bond ETFs at negative $5.7 billion, with the second-largest net redemption occurring in our government-Treasury macro-group at negative $1.6 billion,” Roseen stated.
“Keep in mind that normally there is an inverse relationship between yield and price. The average government-Treasury ETF posted a 1.69% return for the fund-flows week ended August 7, 2019.”
Reporting by Jennifer Ablan; modifying by Diane Craft and Susan Thomas