credit Markets

Inflow Bonanza Rolls On For Blue-Chip Credit, But Junk Funds See First Outflow Since March

The Powell pledge continues to embolden the market.

The flow bonanza rolled on for investment grade credit last week, the latest data from Lipper shows.

In the week through June 24, IG funds took in nearly $8 billion, in a continuation of a veritable tsunami catalyzed by the Fed’s decision to backstop the market.

This marks 11 consecutive weekly inflows for blue-chip debt funds and it’s the fourth time in five weeks that inflows have been $7.5 billion or more.

Around 60% of the outflows seen during the crisis have been reversed. EPFR data shows a dozen straight weeks of inflows for IG bond funds, with last week’s total clocking in at $14.1 billion.

This month’s IG offerings pushed 2020’s total issuance above the entirety of 2019’s deals, a remarkable feat considering the backdrop and a testament to the power of the Fed’s pledge.

Meanwhile, high yield funds saw their first outflow since the week of March 25 according to Lipper. That ends an incredible run at a dozen weeks.

It was hardly an exodus, though. Junk funds lost just $87.6 million, Lipper said. EPFR noted the smallest high yield inflow in 14 weeks, at $1.3 billion.

This comes during a week that saw junk supply notch a monthly record. High yield issuers sold some $47 billion in debt in June, besting the previous mark of $46.4 billion set nearly seven years ago.

One imagines that with the Fed seemingly determined to cap spreads for the foreseeable future, the environment will remain some semblance of friendly for corporate borrowers.

Of course, after gorging themselves on artificially cheap funding for four straight months, corporate “citizens” may no longer need the cash.


 

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