As Mr. Lapointe and his team moved to unload bonds that they could actually sell, the Level 3 assets increased from around 15 percent of assets in Third Avenue portfolios to around 25 percent — a level regulators generally deem unacceptable. Executives even took the extreme step of tapping an emergency credit line from a bank in order to bolster their cash position, said a person who had been briefed on the move by a Third Avenue executive.

Making the job of Third Avenue executives more difficult was that other debt investors were smelling blood in the water.

“In the last few days, we were unable to sell our investments at reasonable prices because market participants were aware we were forced sellers,” said David Barse, Third Avenue’s chief, on the conference call, according to a person who listened in.

The market in junk bonds continued to sell off on Friday.

Some see the turmoil as a warning signal of a broader slowdown in the economy as companies, many of which have borrowed heavily in recent years, struggle to pay down their loans.

“There is a real risk that this could keep echoing in the months ahead,” said Jeffrey Gundlach, the manager of the DoubleLine Total Return Fund who has been warning others about the junk bond market for some time. “It is a really bad thing when a mutual fund does something like this, and it makes me worry that you are going to see similar problems with leveraged hedge funds.”

As an indicator of how bad things have become in the high-yield market, Mr. Gundlach noted that the $10 billion high-yield exchange-traded fund managed by State Street, largely seen as a barometer for the junk bond market, was trading lower today than it did right after the Lehman Brothers crisis in 2008.

“When the market is pricing assets that low, you should worry,” he said.

Mutual fund analysts say that the Third Avenue fund is perhaps the riskiest of the many high-yield funds that investors have been piling into in recent years.