The junk or high yield bond markets in the U.S. have seen diverse returns so far in 2015. Municipal junk bonds are out performing both the senior loan and fixed rate corporate high yield segments of the market. While municipal bonds are being buffeted by Puerto Rico corporate bonds and loans are seeing more significant head winds.
Table 1: Select indices tracking below investment grade segments of the debt markets.
When looking a little deeper into ratings categories within these segments the municipal bond market has continued to shine. Starting with the investment grade BBB ratings category, municipal bonds have had a return of nearly 3.5% year-to-date while the large entities tracked in the S&P 500 BBB Investment Grade Corporate Bond Index has recorded a negative 0.46%. Moving into the below investment grade category of BB+ and below municipal bonds are still outpacing their corporate counterparts. The BB quality range is being impacted by energy bond issues, such as those from Chesapeake Energy, which are playing a big role in dragging down the corporate bond junk sector in 2015.
Table 2: Select indices representing specific ratings categories of the debt markets.