investment grade bonds

photo credit: Peter Van Lancker

After a strong start to August, Corporate Bonds, both Investment-Grade and  High Yield, have underperformed Treasuries over the past two weeks. For the two weeks ending August 21, investment grade corporate bonds and high yield bonds underperformed Treasuries by 0.43% and 2.14%, respectively, according to Barclays data, after stripping out the impact of interest rate movements. Recent underperformance did little to dent the massive  performance lead corporate bonds possess on a year-to-date basis.

Yield spreads to Treasuries widened but remain near early August levels. For  high quality investment grade corporate bonds, the average yield spread to comparable Treasuries widened a relatively modest 0.1% to 2.5%. Although  it resembles only a blip up on the chart, it still represents the only pullback of its kind in what has been a nearly uninterrupted run of  narrower yield spreads since March.
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