Fixed interest markets performance review year to date – some interesting results

We have now passed the halfway mark of 2010 and we thought it would be interesting to put together some figures to show how various bond indices have performed year-to-date (as at July 13). BofA Merrill Lynch provide an excellent download service via Bloomberg which has allowed us to extract the data in the following table. Interestingly, in this perceived world of risk on/risk off, performance YTD in fixed interest markets has not necessarily reflected the amount of credit risk an investor is willing to take.

Within bond markets, AAA rated index-linked gilts have provided a total return of just over 3%. UK gilts have given investors a solid 5.5% return, outperforming some of the higher risk indices like sterling tier 1 and Euro upper tier 2 debt. The financial indices suffered as risk aversion increased due to concerns about the banks exposure to peripheral sovereign debt. The star performers YTD are the corporate indices, particularly high yield, which in Europe and the UK has returned 7.11% and 15.73% respectively.  The Sterling High Yield C index (which is actually CCC & below) has returned a massive 59.37% YTD – though this reflects the fact that the index consists of only 6 issues so big moves in a constituent of that index can swing the returns. Emerging market sovereign debt and emerging market credit have provided investors with double-digit returns, a reflection of the solid macroeconomic conditions that many emerging market nations are currently enjoying.  Note that all returns are measured in local currency terms.

We have also included some of the major equity indices in the table, confirming the choice that Paul the Octopus made last Friday.

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