Index data provided by Markit Group Ltd
i) Returns to end July, 2019
Bond market returns updated monthly
That rising tide continued to lift all boats, with July adding to the most amazing 2019 for just about all risk assets. IG credit (iBoxx) added 1.4% in the month, and in the year to end July total return level rose to 7% for the year to end July. We dare say that most investors will have exceeded 7.5% – 8% for the period. Index spreads tightened by 15bp to B+110bp, while the index yield dropped to a fresh record low of 0.48%. We look for the IG spread to be close to B+100bp by the time we’re back in business proper at the beginning of September.
The AT1 market is up 11% in the year to end July. AT1 index spreads have tightened by 215bp (B+522bp, not the tightest this year), but they have some way to go to get to the B+288bp record tights. We think that is unlikely. The index yield however is at 4.51% versus a record low yield of 2.84%.
In the high yield market, not awash with deals nor any massive spread tightening, the index still returned 8.3% in the period to end July. In the UK, sterling credit spreads tightened by just 6bp in July, but the iBoxx index is up 9.7% in 7-months, as Gilts rallied hard on ‘no-deal’ Brexit fears and the longer duration index supplied a massive boost to bondholders. Away from credit, the Eurozone sovereign sector has returned a massive 7.7% in the 7 months to end July 2019.
Some slightly greater levels of volatility amid concerns around global growth and the US-Chinese trade talks, took the shine of European stocks leaving the Dax’s performance in the 7-month period at +15.9% – which was down from the 17.5% gains seen in the first half of the year. The FTSE was buoyed by the massive pressure on sterling, and returns improved to 12.6% in the period to end July (10.5% in the first half).
Hawkish sentiment from the Fed despite that 25bp rate cut on the 31 July saw a material retreat in US stocks and having been at record levels (S&P500) at the back end of the month, the weakness saw that the 7-month gain came in at 19%! For the Dow that was 15.2%. Not bad at all, considering.
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)