Index data provided by Markit Group Ltd
i) Returns to May, 2019
Bond market returns updated monthly
Looking at May’s performance, risk markets across the board let off some steam, and in credit, it was the first monthly performance reversal this year. Euro-denominated IG credit delivered total returns of +1.1%, +0.7% +1.4% and +0.7% in the consecutive months January to April, but reversed the positive trend in May albeit with losses of just 0.2%.
For the year to date, few are going to quibble with returns residing at +3.7% – but we’re going to need the buffer they offer as we head into a potentially difficult summer period. Benchmark investors will have found the going a little more difficult in May, with IG spreads (iBoxx index) 23.5bp wider and now left with just 27.5bp of tightening in the index in 2019.
High yield investors might feel aggrieved possibly, in much the same way. January to end April recorded monthly total return performances of +2.1%, +1.8%, +1.4% and +1.3% before a loss of 1.3% in May. Obviously the strong correlation with equities has been a factor because we haven’t necessarily seen much evidence of material investor de-risking in the asset class. Still, +5.3% year to date would be happily taken if it was the performance for the full-year. Index spreads have widened by 65bp though in May leaving just 60bp of tightening year to date.
Sterling IG corporate credit has played in line with euro-IG in spread terms but aligned with high yield in total returns (iBoxx index) owing to the longer duration (7.8 years) of the asset class – and helped by the rally in the underlying (Gilts), perhaps disproportionately. Spreads on the index have widened by 19bp during May but total returns have risen by 0.3%. Total returns for the year to end May come in at +5.5% on just 18bp of spread tightening.
Eurozone rate markets have been the big winner in May with returns jumping from +2.5% in the January to April period, to 3.6% for the first five months of the year.
The S&P had a volatile month and lost 6.5% courtesy of it, but still manages to hold on to gain of 9.6% for the year to end May. Surprisingly, the Dax only lost 5% in May but is the best performing stock market for the year in the five months to the end of May, perched up with total returns of 11%. The FTSE has gained 6.5%, the Dow 6.4% and the €Stoxx50 11%.
MiFID II is HERE
ii) IG & HY Corporate Bond Total Returns (Annual)
iii) Investment Grade Corporate Bond Total Returns (Annual)
iv) High Yield Corporate Bond Total Returns (Annual)