Fixed income in 2022

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2022 saw increasing interest rates and spreads result in negative bond market performance across all segments and maturities.

Securities considered relatively safe performed worst. In 2022, European sovereign debt posted a performance of         -18.22% and investment grade credit rated AAA to BBB came in at -13.94%. Meanwhile, European AT1 subordinated financial debt and high yield corporate credit rated BB+ to C closed out the year at -12.97% and -11.16% respectively.


Soaring inflation and monetary policy tightening shook the markets in 2022, resulting in record negative performance across the board. Amid such volatility, long-dated securities were logically affected worst. Moreover, riskier securities with higher coupons held up better that bonds commanding a lower risk premium. Unlike during previous economic downturns, fixed income securities were unable to play their protective role against sliding equities.

A closer look reveals that positive bond portfolio performance in 2022 was driven by the ability to switch to a negative duration profile in order to benefit from the same increasing interest rates and spreads that usually penalise bonds.



The opinion expressed above is dated 6 January 2022 and is subject to change.

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