Corporate Bond Market Returns

Index data provided by Markit Group Ltd

i) YTD Returns to end November 2017

Bond market returns updated monthly

It was a difficult month in some respects for the corporate bond market. We saw considerable market weakness in the opening few sessions of November, and then spent the rest of the month trying to claw back the losses. Equities had a better time of it in the US, but strong European currencies managed to make sure that any exuberance in Europe was limited. Rate markets held relatively firm save for the odd bout of weakness, even as the macro data and rate cycle suggest yields ought to be heading significantly higher.

Investment grade credit returns eventually managed to fall only slightly, but sit at a still sprightly +2.5% in the year to the end November. Spreads managed to recover and the month flat. Sterling IG spreads (Markit iBoxx) were wider by 5bp in November, but returns only edged lower as rate markets were kinder, leaving total returns to fall to +3.4% in the period to end November, versus +3.5% in the ten months to October.

The high beta markets were the ones under most pressure earlier in the month as they had previously set record tights. They rallied later but we failed to recover all the losses. The total return performance for HY (Market iBoxx index) was flat +6.3% for this shorter duration market as the underlying was supportive. However, judging by the current economic outlook we are looking at 6.5%+ for the full year as being likely. Spreads though are unlikely to see the record lows as recorded in the opening session of November.

The AT1/CoCo market has also has a superlative year so far, the iBoxx index for this structured product recording a +17% performance in the year to end November. Depending on positioning, many investors will have gained more than 20% already.

European equities had a difficult time of it in August, but recovered hard in September – and had a super October! November saw some lost performance as currency woes mainly weighed on the attractiveness of equities. The DAX is up 13.4% this year to end November while the FTSE is only up 2.6% – both lower versus the period to end October. US stocks are consistently posting intraday and/or closing highs and the Dow is up over a stunning 23% to the end of November with the S&P up 18% in the same period.

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

iii) Investment Grade Corporate Bond Total Returns (Annual)

iv) High Yield Corporate Bond Total Returns (Annual)