It is official: this was the worst year for high yield bonds in the past 10 years.
Outflows totalling $8.6 billion year-to-date exceed the $6.2 of outflows from high yield bonds in 2011, when the eurozone was in full swing, analysts at Bank of America Merrill Lynch noted in their weekly report.
This year’s outflows have also exceeded the $5.5 billion of funds flowing out of high yield bonds in 2008, when Lehman Brothers went bankrupt.
The week ending on December 17 was no better for high yield bonds. They saw a “dramatic” outflow of $3.2 billion, the Bank of America Merrill Lynch report showed.
In the fixed income universe, emerging market fixed income funds saw their biggest outflow since February last week. According to RBS, outflows from emerging markets fixed income funds were 0.80% of total assets under management (AUM).
“Local currency EM funds have fared particularly badly over the course of 2014, with the YTD outflows amounting to -8.37% of AUM. (whilst hard currency funds recorded positive YTD flows of +0.94% of AUM),” the RBS analysts said.
There were significant outflows from bond funds in all emerging markets regions, which were all negative for the second week in a row.
Flows out of emerging Asian bonds were 0.71% of AUM, double the previous week’s 0.35%, the region’s worst performance since December 2013.
Emerging Europe outflows also doubled compared with the previous week, to 0.51% of AUM, with capital flowing out as the Russian ruble crisis deepened.
Latin American fixed income funds stayed in the red, posting their largest negative print since February, to 0.59% of AUM.
Equities see outflows too
Equity funds did not fare too well either. Outflows totalled $3.1 billion last week, making it 20 weeks of outflows for equity funds in the second half of the year, according to Bank of America Merrill Lynch.
Year-to-date, however, equity funds saw inflows of 11 billion.
For emerging market equities, this week was the fifth straight week of outflows.
The recent week recorded the largest flow out of emerging market equities since August 2011, at 0.74% of AUM, with all regions deep in the red.
Latin America saw its worst performance ever, with outflows totalling 1.13% of AUM, the seventh straight week that money is flowing out of Latin American equities.
Emerging Europe saw its largest outflow since June 2013, totalling 0.93% of AUM, while emerging Asia saw outflows for the fourth week running.
Outflows from emerging Asian equities in the week that ended on December 17 were the largest since February, at 0.17% of AUM.
The clear winner of the year was investment grade debt, with total inflows of $65.7 billion, driven by a flight to quality.