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Big Money Is Now Streaming Back Into Junk Bond Funds

Thursday, December 1, 2016 12:17
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Analyst Paul Weisbruch points out some interesting money flows in his daily update, which include expected OPEC-fueled inflows to oil funds and perhaps an unexpected return to junk bond funds.

Crude Oil is up more than 11% in the past forty eight hours post OPEC, with the largest trackers like USO (U.S. Oil) gapping up to their highest levels since late October. USO has an $11 handle after having a $9 handle just two trading sessions ago on heavy trading volume, and has pulled in more than $600 million in the trailing one month period.

In other activity, High Yield Corporate Bonds have caught a bid lately with inflows in both HYG (iShares HY Corporate Bond, over  $750 million in) and JNK (SPDR High Yield Bond, more than $665 million in). This trend is a big reversal from just a few weeks ago, when billions were leaving these sorts of high yield funds. With interest rates surging amid a massive government bond sell-off, perhaps we shouldn’t be too surprised that low-rated corporate debt is back in vogue.

Several iShares Large Cap, Mid Cap, and Small Cap funds have all attracted new assets lately as well, specifically IVV (iShares Core S&P 500), IJH (iShares Core S&P Mid-Cap) and IJR (iShares Core S&P Small Cap).

Finally, it looks like someone is selling OTM calls in XME (SPDR S&P Metals & Mining) and capping potential near term upside, likely against a long position in the ETF via December 32 strike options. Despite precious metals mining weakness, the XME’s exposure to base metals has helped it rally sharply since Trump’s election.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch
paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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