Corporate Bond Market Returns

Index data provided by Markit Group Ltd

i) YTD Returns to end February 2018

Bond market returns updated monthly

Following on from an excellent 2017 for the corporate bond markets – for both benchmarked and total return investors – 2018 is going to have to go some to get even close in terms of performance. And judging by the early skirmishes, there’s a lot of work to get through.

Corporate bond total return players have dipped in and out of the red in performance depending on the direction of the underlying – yields going higher generally. Performance for IG (-0.3%) for the year to date end February as spreads have widened by a few basis points has been relatively good versus other asset classes.

Sterling markets have lost 1.7% in total returns as spreads have widened by around 17bp on the iBoxx index and Gilts have been under some pressure to the end of February.

The high yield market has also lost 0.3% in the opening two months but supported by virtue of being a shorter duration market and thus the solidity gained from the anchoring of the front-end of the Bund market. There’s been little activity in this market overall, with much suspicion that it is an overbought market and few are prepared to chase spreads tighter.

Equities tough have been extremely volatile and after the high correction in early February, they did manage to regain their poise in the subsequent weeks. The Dow rose by 5.6%, the S&P 5.5% in January, but after nursing some heavy losses are now just 1.3% and 1.5% higher year to date (end February). The Dax was down 3.7% in the same period and the FTSE a massive 6% lower.

The imposition of US import tariffs on steel and aluminium has ensured we are going to see a massive relative correction as we start March. That’s already started to be felt across the markets. In the near term, the US markets could be the predominant winner.


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

iii) Investment Grade Corporate Bond Total Returns (Annual)

iv) High Yield Corporate Bond Total Returns (Annual)