Corporate Bond Market Returns

Index data provided by Markit Group Ltd

i) Returns to end September, 2019

Bond market returns updated monthly

Investment grade return for the 9 months to end September come in at +6.8% on spreads 48bp tighter, and even after we lost 0.8% in total returns in September (with spreads 4bp wider). All that recent returns weakness came against the back of weakness in rate markets. IG credit has underperformed in September. But we think it was a decent enough a result – broadly considering, especially when put against the €50bn of IG issuance which had been absorbed as well as the growing uncertainty on the geopolitical front, the ongoing US/China trade dispute, Brexit and weakening macro.

Sterling corporate bond market returns were flat in September with index spreads 3bp wider, but for the first nine-months of 2019 sterling credit (iBoxx) has delivered +11.2% for investors.

There was a decent bid though for higher yielding assets through September. The AT1 market thus remained relatively firm, with spreads in the iBoxx index 35bp tighter for the month, total returns at +0.9% in September and for the year to date up a massive 12.4% on spreads over 200bp tighter.

It’s a similar story in the high yield corporate market. Issuance for the year has been a hit and miss but we’ve managed to get very close to the €50bn mark so far, while spreads have tightened by 109bp with returns at a robust +8.8% year to date. Even in September, spreads have managed to tighten a little (-11bp) while returns have been flat (well, -0.1%).

Eurozone sovereigns continue to shine, and will retain their lustre through to year-end given that the ECB is due to go shopping again from November. The small matter of poor macro and geopolitical risks will also help. The Eurozone lost 0.4% in returns in September, but investors are still sitting on returns of +10.4% year to date.

As for equities, the €Stoxx50 has gained 19.3%, Dax is up 14.9% YTD after it put on a little in September, with a similar uptick from the FTSE which is up by 10.3% year to end September. The S&P is up 18.6% or the first nine months while the Dow has gained 15.4%.


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

iii) Investment Grade Corporate Bond Total Returns (Annual)

iv) High Yield Corporate Bond Total Returns (Annual)