Leveraged loan funds capture $1.2 billion in August inflows as investors rotate out of fixed-rate high-yield products amid rising Treasury yields and a hawkish Federal Reserve interest rate policy.
Oil prices are mentioned as surging alongside inflation, contributing to the Fed's hawkish rate hike.
Investors are pivoting toward floating-rate assets as the Federal Reserve initiates a new rate-hiking cycle, pushing the benchmark to 4.00%. Leveraged loan funds saw $1.2 billion in August inflows, while fixed-rate high-yield funds suffered $2.5 billion in outflows during the week of the September 16 decision.
Investors are seeking floating-rate assets that benefit from rising interest rates, as opposed to fixed-rate high-yield funds which typically underperform during rate-hiking cycles.
Markets anticipate further tightening, with CME FedWatch data indicating a greater than 50% probability of another 25 basis point hike in October and a target rate of 4.50-4.75% by year-end 2027.