The energy sector of the bond market is dominated by offerings in the high-yield space . But investment-grade energy has attracted notice as well recently. Over the past three months, the sector has handily outperformed both the Bloomberg Barclays U.S.
Aggregate Index and Corporate (investment grade) Index in terms of total return: While the U.S. Aggregate Bond Index rose 0.70% during the three-month period ended August 7, 2018, the U.S. Corporate Index rose 1.18% and the S&P U.S. Investment Grade Corporate Bond Energy Index returned 1.57%, 39 basis points better than the general investment-grade index.
Of course, gains over such a short period might not be indicative of long-term differential return. But these results line up with the overall good news in the U.S. Energy sector, where balance sheets have been bolstered over the past few months by rising energy prices – and which have been used by companies in the sector to pay down debt and take advantage of already-built exploration, production and transportation infrastructure.