It started with stocks, but investors are now withdrawing money from bond mutual funds at a record pace as they seek to avoid assets exposed to any kind of risk.

Going against the usual pattern in a recession, when fixed income is usually viewed as a "safe haven" relative to stocks, bond funds had record net outflows of $31 billion in October according to TrimTabs Investment Research estimates. (see chart below)

Analysts point to the collapse of Lehman Brothers as a turning point in the credit crisis. Debt issuance and prices have fallen significantly, and yields have hit the highest levels in years.

In absolute terms, Baa/BBB yields are now in the 9.25-9.50 percent range, the highest since November 1994. But then Treasury yields were closer to 7 percent, more than twice the current level. That means, in relative terms, corporate bonds are now at the cheapest prices since at least 1954, when the Fed’s data begins.

“We are probably in for a long and deep recession,” said Jim Hannan, who manages about $3 billion of bonds at MTB Investment Advisers. “Every day, the economic statistics come out and they’re weaker than expected.”

Hannan said he’s been selectively buying the bonds of financial institutions that enjoy government backing. He also blamed reduced liquidity in the credit market for the sharp decline in prices.

Since the Lehman bankruptcy, global bond issuance is down about 41 percent, according to Dealogic. Only $85 billion of bonds were priced in October, making it he slowest month since December 2005. The average spread price that investment-grade credits have to pay on new deals has increased to 2.91 percentage points from 1.77 percentage points, according to Dealogic.

The question of paying more is particularly important. Altria on Nov. 5 paid 10.2 percent to sell 30-year bonds. High rates like that will cast doubts on M&A activity and threaten free cash flow, which reducing companies’ abilities to fund growth and dividend payments.

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