Market moves in 2022 have shaped a strong argument for short duration fixed income solutions: 2022 saw government bond yields move sharply higher, credit spreads widen above long-run averages, and yield curves flatten. This was driven largely by persistently high inflation and hawkish central banks, who delivered multiple base rates hikes in an attempt to tame inflation.
09.02.2023 | 07:02 Uhr
2022: A sharp rise in yields
After more than a decade of low inflation and low growth that allowed for 'easier' monetary policy (low/negative interest rates coupled with quantitative easing programmes), central banks were forced to aggressively tighten monetary policy in 2022 in response to persistently high, supply-side driven inflation. The subsequent market moves in government bond yields and credit spreads have shaped a strong argument for short duration fixed income strategies.
The yield on a 2-year German government bond was 338 basis points higher, rising from -0.62% to 2.76%. The credit spread of the Bloomberg 1–3-year EUR investment grade corporate index rose 73bps from 65bps to 138bps. The yield of that very same index rose 4.1%, increasing from -0.01% to 4.09% (see Display 1)
DISPLAY 1 2022: Sharp move higher in short duration yields