October was a relatively quiet month for the bond market, but the dominant trend of 2012 - outperformance for corporate, high-yield, and emerging market bonds - remained firmly in place. All three asset classes continued to perform well amid favorable investor sentiment and the continued search for yield, defying the growing number of skeptics saying that these market segments are due for a reversal. The positive return of emerging market debt, in particular, was impressive given that one of the major issuers in the asset class - Argentina - saw the credit ratings of several provinces, and the city of Buenos Aires, downgraded by Standard & Poor's.
Here in the United States, U.S. Treasuries slipped as investors continued to gravitate toward higher-yielding areas of the market, but Treasury Inflation-Protected Securities (TIPS) remained strong amid growing demand for protection against the possibility of rising inflation. municipal bonds also finished the month with another gain, as investor demand remained strong even as the number of downgraded credit ratings continues to outpace the volume of upgrades.
Below are the bond market returns for October 2012 and year-to-date through October 31.
- Investment-grade U.S. bonds: 0.20%
- 10-Year U.S. Treasuries: -0.28%
- TIPS: 0.87%
- GNMAs: -0.35%
- Municipal bonds: 0.28%
- Corporate bonds: 1.29%
- High yield bonds: 0.86%
- International government bonds: -0.39%
- Emerging market bonds: 0.62%
- Investment-grade U.S. bonds: 4.20%
- 10-Year U.S. Treasuries: 4.09%
- TIPS: 7.17%
- GNMAs: 2.36%
- Municipal bonds: 6.36%
- Corporate bonds: 10.06%
- High yield bonds: 12.17%
- International government bonds: 5.82%
- Emerging market bonds: 14.85%
* Indices used are: Investment-grade U.S. bonds: Barclays U.S. Aggregate Index, 10-Year Treasuries: Citi US Treasury 10 Year Index, TIPS: Barclay US TIPS Index, GNMAs: Barclays GNMA Index, municipal bonds: Barclays Municipal Bond Index, corporate bonds: Barclays Corporate Investment Grade Index, high yield bonds: Credit Suisse High Yield Index, international government bonds: SPDR Barclays Capital International Treasury Bond ETF (BWX), emerging market bonds: iShares JPMorgan USD Emerging Markets Bond Fund (EMB).