Junk Bond Fund Bonanza In The Us May Be Coming To An End

$91 million flowed out of US junk bond mutual funds in the week ended 23 July, making it three weeks in a row of net outflows, according to AMG Data Services. It seems chasing yield in a low interest rate environment may now have driven prices to levels investors no longer consider attractive. However, the abandonment of junk may also reflect profit-taking (Merrill Lynch says junk bond funds have returned 18 per cent so far this year) and growing confidence in an equity market recovery (equity mutual funds took in $3.2 billion in the week ended 23 July).