While the oft-heard argument that "The Fed wouldn't raise rates unless everything is awesome" has held for a few months, as risk assets (high-yield bonds) have rallied along with rising rates, it appears that too much hawkishness (around the 70% chance of a hike) was too much for bulls to bear, as last week saw high-yield bond ETF outflows soar to an all-time record high.

Chart: Bloomberg

As Bloomberg reports, outflows from the iShares iBoxx High Yield Corporate Bond exchange-traded fund (HYG), the top ranked ETF by assets in the junk bond market, set a new record on Thursday - almost eclipsing the $1 billion mark. IShares’ high-grade corporate bond ETF (LQD) also shed $785 million in assets. That brings net outflows over the past week for HYG and LQD to $1.4 billion and $1 billion, respectively.

Chart: Bloomberg

While the price of HYG has yet to fall dramatically...

Despite these outflows, the search for yield is still going strong, according to Bloomberg Intelligence ETF analyst Eric Balchunas. The strong selling of HYG coincided with inflows to the Powershares Senior Loan Portfolio ETF (BKLN), which tracks the performance of shorter-term, floating-rate debt. “This is a sign that investors are not as concerned about credit quality as they are about interest rate sensitivity,” he said. “HYG is a reliable bellwether for how investors are fearing higher rates.”