Icahn: No liquidity for high-yield bonds, market a 'keg of dynamite'

Activist investor Carl Icahn renewed his warnings about the high-yield debt market Friday, criticizing a perceived lack of liquidity in junk bond funds.

"The high-yield market is just a keg of dynamite that sooner or later will blow up," he said on CNBC's "Fast Money: Halftime Report."

Icahn's comments echoed remarks he has made in recent months about the dangers of high-yield debt. They came as Third Avenue Management looked to block investors from withdrawing money from a nearly $1 billion junk bond fund that it is trying to liquidate.

(Hours after Icahn's comments, the Wall Street Journal reported that hedge fund Stone Lion would block redemptions from a fund, and on Monday Bloomberg reported that high-yield credit fund Lucidus Capital Partners had liquidated).

Carl Icahn
Adam Jeffery | CNBC
Carl Icahn

Third Avenue's troubles could fuel concerns as markets await an interest rate decision next week from the Federal Reserve, another frequent Icahn target.

High-yield funds look perilous because "there's no liquidity" behind them, Icahn contended. He voiced similar criticism of BlackRock this summer, saying some of its bond funds create an "extremely dangerous situation."

"The average person that goes into this should basically be warned," he said Friday.

Icahn stressed that financial support for some high-yield funds may prove shaky, and investors should be better informed about the risks. He noted that, while he does not support more government intervention, regulators may want to put increased attention on risks in the junk bond market.

The fallout from high-yield troubles "could be bad, but it could also be possibly stopped and averted," Icahn added.

BlackRock did not immediately respond to a request for comment on its bond funds.

Reuters contributed to this report.