Investors have pulled a record amount out of U.S. junk bond funds in the past week, beating a speedy retreat from what has been one of the hottest areas of the fixed income market in the past year.
U.S. high-yield funds saw a record $4.63 billion in outflows for the week ending on Wednesday, according to Lipper.
Interest rate volatility has surged in recent weeks since benchmark Treasury yields have risen sharply, with selling spilling over into other key areas of the bond market. As exchange traded fund providers and mutual funds face redemptions, they are forced to sell more of their holdings, putting further pressure on prices.
(Read More: The Fed's Bond Dealer: This Will Inflict Pain)
"We are definitely worried that the market is in a cycle where selling of bonds begets more selling," said Steven Boyd, principal at Halyard Asset Management.
The hefty outflows illustrate the anxiety of investors ahead of the May employment report due on Friday. The Federal Reserve has indicated that its suppression of interest rates under quantitative easing depends on the tone of economic data, led by the monthly jobs figures.
"'The jobs report will be a harbinger for how bonds trade during the rest of the month," said Mr. Boyd.