Global corporate bonds underperformed government bonds in October, as credit spreads widened. Global returns for corporate bonds were negative, but local market returns depended on the underlying moves of the respective government bond markets. The month was marked by increased risk aversion, as mixed corporate results added to existing worries over the impact of the ongoing trade dispute between the US and China as well as tightening global monetary policy. While US economic data remained generally robust, there was some weakening in eurozone economic data, with a slowdown in Italy. The latter was in the spotlight as the European Commission rejected the Italian government’s budget proposals, citing worries over the country’s overall debt levels and previous pledges to tackle its deficit. US inflation eased in September, though eurozone inflation for October was expected to pick up owing to the impact of higher energy prices. US-based telecoms group Comcast issued $27bn of bonds to help finance its acquisition of UK-listed telecoms company Sky.
*Source: Lipper to 31 October 2018, total return. Indices rebased to zero at 28 September 2018.
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