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In One Chart: U.S. investment-grade corporate bond funds and ETFs suffer largest weekly outflows of the year

Investors withdrew billions of dollars out of U.S. investment-grade corporate bonds and related exchange-traded funds over the past week as the Federal Reserve’s aggressive rate hikes plans feed fears of an economic downturn. 

U.S. high-grade funds and ETFs saw the biggest weekly outflows of $8.9 billion in the week ended on June 22 from a $6.56 billion outflow a week earlier (see chart), according to a BofA Global, in a weekly report. 

SOURCE: BOFA GLOBAL RESEARCH, FINRA, TRACE, FEDERAL RESERVE

Read More: Corporate America’s debt sinks to lowest prices since 2008. What comes next hinges on inflation

“This weekly outflows was the biggest this year, exceeding the previous record $8.07 billion outflow during the week of May 11,” a team at BofA Global Research wrote on Thursday. “The outflows were largely driven by ex. short-term HG (to $7.12bn from $5.49bn), while outflows from short-term HG remained more moderate (to $1.79bn from $1.06bn).” 

Investors in U.S. corporate debt market have hit by the sector’s sharply negative performance this year, including after high inflation data prompted the Federal Reserve’s decision to raise its policy rate by 75 basis points, the largest move since 1994.

The biggest ETFs for U.S. corporate bonds were headed for weekly gains, but sharp yearly losses. The iShares iBoxx $ Investment Grade Corporate Bond ETF
LQD,
+0.11%

was up 0.1% Friday, but down about 17% on the year so far, according to FactSet data.

A Federal Reserve and Securities Industry and Financial Markets Association (SIFMA) data shows that the U.S. companies now face $10 trillion outstanding debts as of the first quarter of 2022. 

The 10-year Treasury yield 
TMUBMUSD10Y,
3.127%

 climbed to 3.12% on Friday, yet it remains sharply lower after hitting a 11-year high earlier this month. Treasury yields move opposite to price. 

Read more: What the Fed’s biggest rate hike in decades means for the bear market in bonds

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