The Economist Guide to Investment Strategy (3rd Ed) by The Economist

Author:The Economist
Language: eng
Format: epub
Publisher: PublicAffairs

FIG 8.3 Cumulative performance of US under 10-year Treasury and corporate bonds

Jan 1987–Sep 2013, Jan 1987 = 100

a All maturities for high yield.

Source: Barclays

Table 8.5 shows how the performance of investment grade credit has persistently delivered a smaller premium return over Treasury bonds than would be suggested by the spreads offered by the index. In the table this is shown by the unexplained “performance gap”.

Some performance gap should be expected from the impact of occasional defaults. But their impact has been too small to account for the performance gap in Table 8.5. Fitch, one of the three leading international rating agencies, reports that the average five-year cumulative default rate for Fitch-rated investment grade bond issuers averaged 1.2% between 1990 and 2012, or 0.25% per year. However, actual losses will have averaged less than this as a result of recoveries of, probably, around 40% of amounts due.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.