What Do Cracks in the Junk Bond Market Tell Us About Equities

“The market for junk bonds – or high yield debt – has been on a tear as investors have poured money into the asset class.

But that market has recently started to show some cracks.

Bloomberg’s Lisa Abramowicz reported earlier in the week:

Investors yanked a record volume of cash from BlackRock Inc. (BLK)’s exchange-traded fund that buys junk bonds as the notes lose value for the first month since May.

The $16.3 billion fund reported an outflow of 2.4 million shares yesterday, equal to about $218.9 million, according to data compiled by Bloomberg. That’s the biggest daily withdrawal in the five-year history of the iShares iBoxx High Yield Corporate Bond Fund, the largest of its kind.

The obvious question, then, is where the market goes from here – do the redemptions continue, or does activity level out? ”

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