The Chicago Board Options Exchange Volatility Index, or VIX, a benchmark for expected stock-market volatility, plunged 35 percent in the two days ended Jan. 2, to 14.7, as U.S. legislators averted tax increases that risked pushing the nation back into a recession. It continued falling as the Standard & Poor’s 500 Index posted its best start to a year since 1997.

Funds Pulled

“Volatility in credit has indeed been somewhat higher than in equities on a relative basis,” Bank of America’s Melentyev said in an e-mail.

Yields on the dollar-denominated notes have increased 13 basis points to 6.54 percent since reaching the record low on Jan. 25 as concern mounted that the debt will lose value when U.S. Treasuries rise. The Standard & Poor’s 500 Index rose 0.6 percent during the same period.

Investors yanked $1.4 billion from U.S. high-yield bond funds in the first week of February as Treasury yields rose from record lows to the highest levels in 10 months, eroding the debt’s value, according to data compiled by Royal Bank of Scotland Group Plc and Bloomberg.

That follows the $20.9 billion of deposits into the funds last year as the Fed held benchmark borrowing rates at about zero in an attempt to galvanize an economy still recovering from the credit crisis. Investors pumped $37 billion into equity funds in January, the most since 2004, estimates from the Washington-based Investment Company Institute show.

Greater Sensitivity

“The higher quality of high-yield is now super-sensitive to interest rates,” said Matt Duch, who helps manage $12 billion in assets under management at Calvert Investments Inc. “Often your roadmap is past events, and I don’t think we have much to go on with high-yield right now.”

Average modified duration on the $452.2 billion of BB rated bonds in a Bank of America Merrill Lynch index rose to an average 5.4 years Jan. 6, the highest since 2007. Duration is a gauge of debt’s sensitivity to increasing interest rates.

Investors from Loomis Sayles & Co.’s Dan Fuss to Oaktree Capital Management LP’s Howard Marks have said prices on junk bonds are too high.