Corporate Bond Market Returns

Index data provided by Markit Group Ltd

i) YTD Returns to end May 2018

Bond market returns updated monthly

After a better April, and hopes at the beginning of May that the month would bring further market rallies, we ended up under some pressure in the Month. Italian political woes were the chief culprit for the late sell-off in the month, although fears of a global trade war and the Spanish vote of confidence in the ruling party also heightened nerves.

Credit spreads gapped wider, equities were volatile but didn’t quite fall out of bed, Italian debt and equity markets plummeted – only to recover in the final session, and safe-havens caught a bid but not enough to keep us in the black year to date.

So as it stands in the opening five months of the year, the Dax is now off 2.5% representing a small decline from the weakness in the Jan-Apr period. The FTSE fared better helped by a weakening of the currency and was flat in the Jan-May period. US equity markets had been more resilient, with S&P up 1.2% and the Dow lower by 1.2%, versus -0.9% and -2.2% in Jan-April, respectively.

Eurozone sovereigns rallied on the back of the increasing event risk and the Markit iBoxx Eurozone sovereign index, but ended falling onto the red on a total return basis recording total returns of -0.25% (to end May), versus +1% in the opening four months of the year.

In credit, IG spreads gapped by almost 30bp, and whilst the underlying was rallying returns fell a touch more to -0.6% for the year to end May (versus s-0.4% to end April). The high yield market did bworse, spreads gapping by over 70bp on the iBoxx index and returns at -1.2% in the opening five months, versus 0.1% in the Jan-Apr period.

The firmer tone in the Gilt market through May, as the data showed a slowing in the UK economy with the likelihood of no rate hike this year (in our view), helped offset the more moderate corporate spread weakness and returns were a little improved at -1.3% in the opening five month period.


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

iii) Investment Grade Corporate Bond Total Returns (Annual)

iv) High Yield Corporate Bond Total Returns (Annual)