Third Avenue Redemption Freeze Sends Chill Through Credit Market
- Freeze on withdrawals comes as junk bonds head for annual drop
- Biggest outflows in a year are a `dark cloud' over the market
How Will Markets React to the Third Avenue Freeze?
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Investors who piled into the riskiest corners of the credit markets during seven years of rock-bottom interest rates are getting a reminder of how hard it can be to cash out.
With outflows from U.S. high-yield bond funds running at the fastest pace in more than a year, Martin Whitman’s Third Avenue Management took the rare step of freezing withdrawals from a $788 million credit mutual fund on Dec. 9. The firm’s assessment that meeting redemptions would be impossible without resorting to fire sales has put a spotlight on the dangers for junk-bond investors as the Federal Reserve prepares to lift interest rates as soon as next week.