Investors Pour $680 Million Into U.S. Junk Bonds in Latest Reporting Week

By Dow Jones Business News, 
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By Katy Burne

Investors poured $680 million into funds dedicated to low-rated corporate debt in the week ended on Wednesday, according to fund tracker Lipper, snapping four weeks of declines that included the previous week's record $7.1 billion weekly outflow.

Observers pointed to a change in sentiment in early August for so-called junk bonds, as institutional buyers stepped in hunting for bargains. U.S. high-yield bonds lost 1.33% in July, but in August have returned 0.7% through Wednesday, according to Barclays PLC.

Gulfport Energy this week increased a $250 million junk-bond offering to $300 million, giving it more cash to pay down its revolving credit line with banks and for other general corporate purposes. The debt was priced to yield 6.106%, vs. the earlier suggested rate of 6.165% to 6.234%, according to S&P Capital IQ Leveraged Commentary & Data.

A debut bond offering for XPO Logistics priced at par, or 100 cents on the dollar, to yield 7.875%, at the issuer- friendly end of the original suggested 7.875% to 8.125% range. Debut borrowers are a hallmark of healthy junk-bond markets, where low-profile issuers can take advantage of heavy demand. Immediately after the sale closed, the bonds were quoted at 102 cents on the dollar, said LCD.

The recent downdraft in junk debt highlights concerns that purchasers in the $1.6 trillion U.S. market, lured by higher income than on government and highly rated corporate bonds, have paid too much for the securities. Prices had rallied over the past year, sending yields to levels too low to compensate buyers for the risk of the investments, some investors say.

The tremors are being closely scrutinized across Wall Street. Many investors this year have expressed concerns that a pullback in junk-bond prices could signal that market participants are rethinking their willingness to take risk, foreshadowing further declines in stocks and other risky assets.

The latest inflows could help to ease those concerns, some traders and analysts said.

Write to Katy Burne at katy.burne@wsj.com

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This article appears in: ETFs , Energy , Bonds

Referenced Stocks: BCS , BCY , GPOR , XPO

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