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.

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.

Read more: Junk Bonds Spooked by Worst October Since 2008 as Yields Spike

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.”

To contact the reporter on this story: Jeremy Hill in New York at jhill273@bloomberg.net

To contact the editors responsible for this story: Christopher DeReza at cdereza1@bloomberg.net, Randall Jensen, Brendan Walsh

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