Corporate Debt Is Heading for Worst Month Since February's Rout

(Bloomberg) -- Investment-grade bonds are set for the worst month since February’s rout.

U.S. high-grade debt is headed for a decline of 1.2 percent this month and the worst October in a decade, according to the Bloomberg Barclays Indexes. The bonds still outperformed their junk-rated peers, which are set for a slide of 1.8 percent, the biggest in nearly three years. It would be the first time investment-grade has outperformed high-yield in five months.

Corporate Debt Is Heading for Worst Month Since February's Rout

A laundry list of worries -- from higher interest rates to trade-war concerns -- struck financial markets this month, and bonds have been no exception.

“High-yield underperforming U.S. IG makes sense in that it’s clearly about risk right now,” Tim Doubek, a portfolio manager at Columbia Threadneedle Investments, said in an interview.

Corporate Debt Is Heading for Worst Month Since February's Rout

For the year, junk bonds are still doing better. They’ve handed investors returns of 0.72 percent, compared with a 3.5 percent loss for the better-rated debt.

“It’s been kind of a confounding thing for us,” Doubek said. “Part of the IG total return shortfall can be explained by rising Treasury rates.”

Corporate Debt Is Heading for Worst Month Since February's Rout
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