Corporate Bond Market Returns

Index data provided by Markit Group Ltd

i) YTD Returns to end September 2018

Bond market returns updated monthly

In terms of monthly performance, fixed income has been in the ascendancy all year – in Europe anyway. The asset class has been a solid defensive investment.

In September, IG credit returned -0.3%, high yield credit +0.1% and sterling corporate credit has lost 1%. The FTSE was up 1%, the Dax off by 1.5% and the €Stoxx50 up 0.25%. For the year to end September, IG euro-denominated credit has returned -0.7% and high yield credit -0.1% (all iBoxx), while the longer duration nature of the sterling corporate market has seen it suffer 2% losses. The Eurozone sovereign index lost just 0.2% in September and is lower by just 0.5% in the opening period to end September in 2018.

For benchmark investors, IG spreads as measured by the iBoxx index tightened by 5bp in September but are 43bp wider in the first nine months, coming after the 10bp of weakness in spreads in the index in August. For al the political travails in the UK, the sterling corporate market closed the month with spreads just 0.5bp wider (essentially unchanged) at G+156.7bp – and that comes after a decent level of issuance especially through August that seems to have been well absorbed.

After some early weakness in spreads at the beginning of September (and in the final session!), the high yield market staged a moderate recovery and spreads eventually tightened by 13bp in the index, closing at B+385.6bp.

Compared to equities, the FTSE is off 2.3% in the first nine months of this year, the Dax a whopping 5.1% lower and the €Stoxx50 3% lower.

Then there is the US. It’s in a world of its own and stocks there have been in good form – for most of the year, and are ripping higher. For instance, in September they outperformed with the S&P up 0.4% while the Dow was higher by 1.9%. Both indices saw record highs during the month. For the year to date, the performance is very impressive with the Dow index higher by 7% and the S&P up 9%.


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

iii) Investment Grade Corporate Bond Total Returns (Annual)

iv) High Yield Corporate Bond Total Returns (Annual)