Index data provided by Markit Group Ltd
i) YTD Returns to end September 2017
Bond market returns updated monthly
September threw up a fairly messy month where performance was disjointed particularly within the fixed income asset classes. Rate markets basically dictated the winners and losers for the month. Spreads generally held firm and we moved together in most cases, higher beta risk outperformed (shorter duration risk) while sterling credit had a difficult time of it as the Gilt market came under some considerable pressure (rate hike is nigh). Geopolitics had an impact in terms of volatility, but less so than previously, likely because we have become hardened to it, while the potential for ECB tapering added some pressure on Eurozone government bond yields.
Investment grade credit returns edged lower in September, but are still up 1.6% in the none months to end September. Sterling IG spreads (Markit iBoxx) were flat in September, returns dropped 2% in the month and the year to end September performance fell back to +2.8% versus +4.9% in the period to end August.
The high yield market outperformed, with spreads around 20bp tighter and the nine month preference rose to 5.5% for this shorter duration market, less impacted by the rise in rates. 6%+ for the full year is not impossible and spreads for this market are just a few basis points away from the record lows seen in early August.
The AT1/CoCo market has also has a superlative year so far, the iBoxx index for this structured product recording a +13% performance in the opening nine months. We look for 15% as a target for the year.
European equities had a difficult time of it in August, but recovered hard in September. The DAX is up 11.8% this year, having been up just 5% in the period to end August. Stronger sterling, higher rates and some Brexit fears saw the FTSE’s performance fall back to +3.2% in the opening nine months.
Once again though, the US markets come out top. They close September at record levels for the S&P and Dow and those markets have returned a stellar 12.5% and 13.4%, respectively, in 2017.
MiFID II Countdown
ii) IG & HY Corporate Bond Total Returns (Annual)
iii) Investment Grade Corporate Bond Total Returns (Annual)
iv) High Yield Corporate Bond Total Returns (Annual)