A brutal year for bond markets in 2022 ended with a silver lining for investors: It raised fixed income yields to some of the most attractive levels seen since the global financial crisis.
Higher yields (Figure 4, left) were mirrored in greatly improved valuations for both sovereigns and private credits, with many sectors selling close to or below their 15‑year historical medians as of late November (Figure 4, right).
Higher‑quality credits in the mortgage‑ backed and asset‑backed sectors also are attracting inflows from investors looking to put cash to work or extend duration (a measure of interest rate sensitivity), McCormick adds.
“This is the first opportunity try to lock in high‑single‑digit yields in over a decade,” McCormick says. “Anytime there’s been a glimmer that the Fed might be ready to slow its pace, or that inflation might have peaked, we’ve seen money find its way into the market.”