Corporate bond spread charts for Investment grade bonds data. iBoxx EUR Corporates Index data provided by Markit Group Ltd.
These charts are updated monthly.
i) Euro Investment Grade Bond Index: Corporate Spreads
The period from late 2007 through to Q1 2009 coincided with the greatest widening in credit spreads ever seen. The excess systemic leverage/structured product bid leading to very tight spreads markets in the preceding 2003-2007 period was spectacularly undone.
We recovered hard in 2009 once the central bank easing began with money looking for a home in cheap, high yielding corporate bonds. 2009 coincided with the greatest spread tightening era ever seen.
While corporate bond markets sold off in late 2011-2012, we have seen a good recovery since. The compression trade, between high and low beta corporate bonds all the way down to and including the HY market was a key feature in the 2012-2014 years and the ECB QE-related 2016-2017 period.
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ii) Investment Grade Bond Index: Corporate Spreads 2015-
Investment grade spreads as measured by the iBoxx IG cash index widened by 76bp in 2018. There were hints of a crisis for equities coming from slowing macro and a cacophony of geopolitical situations, and while credit managed to stay clear of a direct hit, the asset class got dragged into the weakness.
It was the poorest year for widening since 2016, but the worst since 2008 for total return performance as we returned -1.2%.
However, in 2019, all risk assets have rallied. Equities have typically put on 15%+ (to end September), but fixed income assets have had a tremendous time of it as well. IG spreads have tightened 50bp in this period, and returns have come in at almost 7% for the opening 9-month period.
We’re not at record lows (B+83bp) and are unlikely going to get there in 2019 (currently at B+124bp, Oct 2019). However, the ECB is back in play from November and its QE purchases might offer bit a push into year-end.
iii) Investment Grade Bond Index: Corporate Yields
We’ve seen a crunch lower in index yields in 2019. It has predominately been driven by the rally int he underlying, but credit spreads have tightened too. From 1.62% in January 2019, we saw a record low index yield of 0.38% in August. The weakness in government bond markets in September saw those yields back-up to 0.54% at the beginning of October.
The rally has boosted returns for all fixed income asset classes. More importantly, for credit investors, in so far as refinancing helps keep the default rate low (extending maturities), the lower yield environment has boosted issuance. We’re heading for a record IG non-financial deal total in 2019, while the high yield market and senior debt issuance volumes are at higher levels than average.
IG Spread Analytics HY-IG Spread differential
Frequently Asked Questions
What is a corporate bond spread?
A corporate bond spread can be defined as the difference between bonds of the same or similar maturity which have differing quality.