Here are the latest estimates of performance across the various fixed income markets over the past month.
|1-month total return (including interest income)|
High yield corporate bonds have been the best performer in this near-panic unwind. The reasons include low default rates and strong corporate balance sheets as well as relatively short maturities and relatively high current income (which is included in the performance numbers above).
A great deal of this outperformance recently though has been driven by the strength of the US equity markets. HY spreads tend to have a strong inverse relationship to stock prices.
And with HY spread being a significant component of the overall yield, strong equity markets have kept yield increases relatively modest. If equities come under pressure however, all bets are off for HY.
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