Corporate Bond Market Returns

Index data provided by Markit Group Ltd

i) YTD Returns to end July 2018

Bond market returns updated monthly

July was a solid month for risk assets, despite the elevated level geopolitical event risk. IG credit returned +0.25% in July. For the 7 month period to the end of July credit, therefore, managed to recoup some previous declines, with total returns now at -0.5% in the period  (as measured by the Markit iBoxx index). Spreads on this cash index tightened by 10bp in the month, representing one of the best monthly tightenings this year (still 30bp wider YTD). For the subsections, non-financials returned +0.1% in July and financials +0.3%, while they have returned -0.25% and 0.8% year to end July, respectively.

The high yield market fared better, returning +1.5% in the month and managing to claw back most the deficit seen in the opening six months, to -0.3% of losses in the year to end July. Spreads tightened by 40bp on the iBoxx HY index.

The sterling corporate market came in flat in total returns terms, with index spreads 4bp tighter – representing a clear underperformance versus IG euro markets, and total returns for the 7-month period are at -1.8% with Gilt markets for this longer duration market being choppy and unhelpful (spreads wider by almost 30bp YTD).

The Eurozone sovereign index has also been through a fairly choppy period in July, with the weakness coming late in the month such that returns fell into negative territory at -0.5%. For the year to date, they’re flat.

Equities fared better, as we might have expected. The FTSE is now up 0.8% for the year versus being down 0.7% in the opening six months. The DAX is now returning -0.8% in the year to end July versus -4.7% in the January-June period, even after having endured a fairly choppy July, it must be noted. The industrial production and business confidence data hasn’t been upbeat, but German equities have still managed a good month (up 4%). The €Stoxx50 has also hauled itself back into contention, now up almost 0.5% YTD after being down 3% in Jan – June.

In the US, stocks have had a good month, too, with the S&P now up 5.5% for the year against being just 1.6% higher in the opening 6 months of 2018. The Dow has hauled itself back into the black, turning a 1.8% loss in the opening half of the year into gains of 2.9% in the year to end July.


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

iii) Investment Grade Corporate Bond Total Returns (Annual)

iv) High Yield Corporate Bond Total Returns (Annual)