US investors exit high yield bonds

Investors are selling out of high yield corporate bonds at the fastest rate in almost five years as nerves over sovereign debt creeps into other credit markets, the Financial Times reports.

It says figures from Lipper FMI show almost $1bn was withdrawn from US high yield bond funds and ETFs in the week ending Wednesday 10 February, representing the largest outflow since September 2005.

Spreads have widened by more than 100bp since 11 January and now stand at 700bp in the US.

Morgan Stanley says sovereign risks could ultimately cause serious problems for corporate debt.

"Though corporate fundamentals are quickly improving, credit is not immune from sovereign risks,", the firm says. 

"If the result of sovereign problems is fiscal tightening and higher rates, a double-dip recession becomes an increasing possibility. This outcome would dent, if not fully derail, the positive trend in corporate fundamentals."