Global corporate bonds generated negative returns over August. While the month was characterised by a rise in nominal US Treasury yields, weakness in the investment grade credit market contrasted with buoyant returns from high yield bonds, which benefited from robust risk appetite. The Federal Reserve (Fed) unveiled a new strategy to allow inflation to modestly breach its 2% target to make up for periods of below-target inflation. Meanwhile, the Fed’s preferred measure of inflation rose to 1.3% in July from 1.1% in June. Global economic data was generally positive in August, though there were some concerns over whether recovery momentum would be sustained. While remaining elevated, the number of new daily US Covid-19 cases fell as the month progressed. In Europe, however, new case levels rose over August.
*Source: Lipper to 31-Aug-20, total return. Indices rebased to zero at 31-Jul-20.