The biggest part of the $10 trillion U.S. corporate bond market is heading for its worst year on record, according to Goldman Sachs.
The biggest part of the roughly $10 trillion U.S. corporate bond market looks poised to cement its worst year ever, by a long shot.
Investment-grade corporate bonds, a longtime source of funding for the world’s biggest companies, was set for a minus-14% total return in 2022, “a level that is nearly three times the second-greatest decline on record since 1974,” according to Goldman Sachs researchers. But 2022 has been an entirely different environment, with the carnage in corporate bonds not stemming from a wave of company defaults but mostly to the Federal Reserve’s rapid pace of rate hikes. Its policy rate shot up to a 4.25% to 4.5% range last week, from near zero in March.
Many individuals gain exposure to bonds through exchange-traded funds. Shares of the large $18.6 billion iShares iBoxx $ Investment Grade Corporate Bond ETF LQD were down 18.6% on the year through Monday, according to FactSet. That compares with a roughly 13.4% decline for the $82.8 billion iShares Core U.S. Aggregate Bond ETF AGG , a fund that tracks the benchmark Bloomberg U.S. Aggregate Bond Index.
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