Investment grade bonds data: Hover over the charts to see the values at a given date. 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.
More for Subscibers:
Get it in - while the going is good... It appeared a slow day - for anyone who wasn't involved in the corporate bond market. Because primary was churning out deals through a very busy session. Corporate treasury desks were taking advantage of what appears to be quieter week on the news flow/data front with the Fed/BoE/BoJ all expected to leave policy unchanged when they deli [...]
You can’t stop the music
Nobody can stop the music We can probably brush away the impending milestone of -0.30% yield on the 10-year Bund, given that after hitting a record low intraday low of -0.27% it's just a Trump tweet or a skirmish away from it. Something thereabouts is now being dismissed almost as being a normal state of affairs. The worries pile up when we get to -0.50%, while we have a rec [...]
Time for a breather
Markets anticipating central bank action... As we approach the halfway point for the month, the markets have steadied, albeit comforted knowing that a dose of policy easing is likely coming, and are therefore willing to let the numerous difficult macro/geopolitical developing situations pass. For the moment. Equities generally tread water and government bonds are stable to b [...]
Game of Bonds
Busy primary keeps credit in focus... Once again there was a strong financial flavour to the primary credit market with an added spice from SSA and covered bond issuance. As for the rest, hopes that the previous session was the start of something brighter was done away with, as all the old fears surfaced and were used as an excuse to explain the ills of the market. Credit [...]
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 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%.
All sectors were hit, high beta clearly under performing, and the weakness was exacerbated late on as cheap new issues repriced whole sectors.
We’re set to weaken some more through 2019, but he extent of that weakness will depend on the evolving macro environment and also the ongoing geopolitical risks. We’ve set a target of 15bp of widening in the index (positive total returns though), hoping that policy response to the potential for recessionary forces to batter risk assets is quick and decisive.
iii) Investment Grade Bond Index: Corporate Yields
Yields from investment grade bonds have backed up from the 2017 lows but the overall firmness in the underlying has helped keep them at still relatively low levels. We have been as low as 0.88% on the index and as high as 1.80%, but we have been in a 1.30% index yield area for much of the period from May (dragged higher by spread weakness later, end Dec at 1.70%).
The chart shows how the corporate bond market has benefited from QE – the need for investors to buy safe, higher-yielding assets while the high levels of demand have promoted the disintermediation in funding for the corporate sector. Event risk largely around US politics (Trump/China/trade wars) and to a lesser extent Brexit have prevented underlying yields from popping materially higher.
With underlying yields set to remain anchored as macro weakens, the yield on the index is unlikely going to exceed 2% by much.IG Spread Analytics HY-IG Spread differential