Corporate Bond Market Returns

Index data provided by Markit Group Ltd

i) YTD Returns to end November 2018

Bond market returns updated monthly

Credit nursed some big losses in November. Having held up so well against a fairly hostile macro/geopolitical backdrop which saw huge volatility in equity markets, credit markets have had a very poor month. It’s not as if other markets have a particular lure, but we just seem to have been impacted by investors probably overly concerned about protecting performance, much repricing of of secondaries that comes with cheap primary, punishing single-name stories, some outflows and massive illiquidity leading to a disproportionate spread weakness. It’s difficult to trade.

IG had lost 0.8% in the ten months to end October, but in the 11-month period this year it has now lost 1.5% (total returns, iBoxx index) coming from a very weak November. Spreads widened by 23bp in the month in the IG iBoxx index. Non-financial sector losses in the period rose to 1.3%, while financials lost 1.7% – all recording significant declines in November.

The high yield market took a big hit too. The Jan – Oct period resulted in total returns of -1.3%, but when we include November, those losses increased, to -3.2% mostly all due to spread weakness. The CoCo index is nursing losses of 5% this year.

Sterling IG, a longer duration sector, is sitting on losses of 3.3% in the year to end November. The winner in fixed income markets? Eurozone sovereigns, returning -0.05% in the 11-months so far.

We don’t have it so bad though in credit. We saw further deterioration in equities through November. The Dax is now showing total returns of -12.8% in the year to end November (-11.4% to end October). The FTSE is off by 9.2% in the same period (-7.3% to end October). EuroStoxx are down 9.5% in the year to end November.

US stocks have fared better though, saved by that late big rally in the final sessions of the month. The S&P is up 3% and the Dow is +3.3%, both in the period to end November. With Brent at $59 per barrel, it is $7 lower since the start of the year, and $26 lower than its 2018 peak.


ii) IG & HY Corporate Bond Total Returns (Annual)

iii) Investment Grade Corporate Bond Total Returns (Annual)

iv) High Yield Corporate Bond Total Returns (Annual)