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Investors are deserting junk bonds as trade tensions sour mood

Investors pulled US$3.2 billion from retail funds in the weekly reporting period ended June 5: Lipper data

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High-yield spreads have widened by 70 basis points since the start of May, with energy companies hit particularly hard by the oil market slump.

New York

HIGH-YIELD corporate bond funds saw the pace of outflows accelerate this week amid global trade tensions and growth worries.

Investors pulled US$3.2 billion from retail funds in the weekly reporting period ended June 5, according to data from Refinitiv's Lipper. The outflow is the biggest cash withdrawal from junk-bond funds since December and more than double the US$1.27 billion pulled last week.

Investors have fled risk assets and piled into safe havens in recent weeks amid concerns about a trade war and the resilience of the global economy. US government Treasury funds saw a more than five-fold increase of inflows to US$6.77 billion this week, Lipper data shows.

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High-yield spreads have widened by 70 basis points since the start of May, with energy companies hit particularly hard by the oil market slump.

Executives at Pacific Investment Management Co and MetLife Inc are sounding alarms about companies' ballooning debt loads after more than a decade of cheap money and deteriorating lending standards. As the US-China trade wars heat up, top money managers at Pimco called the market "probably the riskiest ever" and "the area of most concern for us" in interviews with Bloomberg.

The latest Lipper high-yield data comes on the heels of some heavy swings in BlackRock Inc's iShares iBoxx High Yield Corporate Bond ETF, the biggest junk-debt fund and known by its ticker HYG. More than US$1.5billion flowed into the fund, just 24 hours after it saw its third-worst withdrawal ever, data compiled by Bloomberg shows. BLOOMBERG