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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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Ya know, those D@?# numbers that are thrown around in $ terms (HY bonds), geez.....

catch22catch22
edited February 2018 in Fund Discussions
I saw the report earlier and @Ted posted recent about the outflow of monies from high yield bonds; well okay, but.....
Okay, so the second biggest money outflow on record from high yield is probably worth some type of note in the financial press; but it tis a small percentage number in the "move".


Here are more details on fund flows from a current report:

First IG bond fund redemptions in 60 weeks ($2.0bn)
HY bond redemptions second highest on record ($10.9bn)
Largest EM debt outflows for 64 weeks ($2.9bn)
Modest muni fund outflows ($0.7bn)
Strong govt/Tsy fund inflows continue ($2.4bn)
Tiny TIPS inflows ($0.01bn)
Small bank loan fund outflows ($0.2bn)

Based upon the reported numbers above and the reported dollar value of high yield bonds in the U.S. from Forbes being at $1.3 trillion; the percentage change of the HY money outflow = .85% .
I'll use this example of percentage moves that "could" provide the same headlines, but you will not likely ever see a mention:
The U.S. 10 year note yield moves from 2% to 2.05% during a trading day. This is a 2.5% move. Ya won't see this reported, eh?

Anyway, always pay attention to how numbers are crunched. Yes, even small moves may be of value to monitor and other aspects may be causing traders in any market to adjust. What is the overall trend in any market sector and what do you feel is the reason?
These dollar values do not necessarily have any real value in the big picture. This would not be unlike my smile when I see a truck commercial on tv indicating a price drop or rebate or whatever they choose to phrase being at $10,000 of the MSRP. Okay, so what; in 1970 one could buy 3 fully loaded Chevy Impalas for about $10,000. We need reference points, yes???
No, we investors do not "play" in either a fair or concise world of money.

E.O.R. (end of rant)
Have a good remainder
Catch

Comments

  • TedTed
    @catch22: You get an A+ for the rant. High-yield outflows this year now stand at $13.7 billion is not chicken feed.
    Regards,
    Ted:)
  • davfordavfor
    Looking at the post by @Ted had me taking a look at my 2 high yield funds, ARTFX and MCRDX. They are both in the plus column for the year as of this morning. It seems to me the impact has only been a hiccup....
  • TedTed
    @davfor: MCRDX is not a high-yield bond fund, it's a world bond fund. Over 60% of it's assets are in investment grade bonds.
    Regards,
    Ted:)
  • TedTed
    @catch22 & davfor: Funds that buy junk bonds suffered their second-highest outflow on record. End of story !
    Regards,
    Ted
    https://www.bloomberg.com/news/articles/2018-02-16/selloff-spreads-to-company-debt?srnd=fixedincome
  • davfordavfor
    @Ted My point was that the big headline number has had limited real world impact. For example, JNK has only been down about 2% at its low so far this year....
  • catch22catch22
    Hi @davfor
    ARTFX is a fund I track for purposes of "looking" at this area. Tis a well managed HY fund.
    In the HY sector, and not being a trader; I personally would only invest in active managed funds. HYG and JNK usually do not keep pace because of other internal holdings.
    A quick 1 year chart for a view.....the link indicates the chosen compares:

    http://stockcharts.com/freecharts/perf.php?HYG,JNK,ARTFX,SPHIX&p=5&O=011000

    As to MRCDX. It does have a "high" yield, but I suspect this is due to yield rates of the corporate investments. International rates/yields are quite a bit higher than the U.S.
  • davfordavfor
    edited February 2018
    @catch22

    As usual, your stockcharts chart does not come through on my computer. But, I also looked at 1 year in M* so I got the picture.

    @Ted

    My definition of high yield is <BBB. Here is the latest composition info from Matthews (see Portfolio Breakdown %/Quality Distribution):

    BBB- 3.7
    BB+ 4.2
    BB 4.5
    BB- 12.9
    B+ 15.1
    B 14.5
    B- 3.5
    Not Rated 29.1

    I could alway be reading something incorrectly but it sure quacks like high yield to me!

    See: https://matthewsasia.com/our-funds/f-32/matthews-asia-credit-opportunities-fund/investor/composition.fs#PortfolioBreakdown

    Also, here is an excerpt from the Outlook section of the latest commentary that suggests high yield is central to their current thinking:

    "In our view, Asia high yield bonds look reasonably valued, while U.S. and European high yield bonds appear overvalued. Credit spreads for Asia high yield bonds are near historic averages. In contrast, spreads for U.S. high yield bonds are about 200 basis points (2.0%) below average while spreads for European high yield bonds are 300 basis points (3.0%) below average. In simple terms, Asia high yield bonds are compensating investors for taking credit risk, in our view, while U.S. and European high yield bonds are not."

    https://matthewsasia.com/our-funds/f-32/matthews-asia-credit-opportunities-fund/investor/commentary.fs

  • AndyJ
    edited February 2018
    @davfor, you're right on the money about MCRDX. The only investment grade FI in the portfolio is that sliver in BBB-, the lowest IG rating. Everything else is below IG, not rated, or cash (12%).

    T. Kong's rollout communication emphasized U.S. dollar-denominated non-IG Asian issues, and that's been the main emphasis ever since. Currency weighting reported on the current fact sheet is 79% U.S.$ and 9% Chi renminbi (12% cash).

    I own her other fund, MAINX, but check in on MCRDX every so often too. She's a good manager.
  • davfordavfor
    @AndyJ T. Kong's comment corresponds to my sense that MCRDX is intended to be primarily a high yield bond fund. Your comment about MAINX prompted me to take another look at both prospectuses. (I had an investment in MAINX before investing in MCRDX.) The MCRDX prospectus specifically states that "A substantial portion of the Fund’s portfolio will be rated below investment grade or, if unrated, may be deemed by the Fund’s portfolio managers to be of comparable quality". The MAINX prospectus states more generally that "The Fund is permitted to invest in debt securities of any quality, including high yield debt securities rated below investment grade (commonly referred to as “junk bonds”) and unrated debt securities". True to their prospectuses, the quality of MAINX's investments are more diversified than those of MCRDX. Also, the managers have included a currency component in MAINX's investment mix. So far the returns for the two funds have been similar. I am watching to see if they diverge more as time passes.
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