2023 outlook for credit markets

Further volatility

A combination of rising government bond yields and widening credit spreads created a perfect storm for credit investors over 2022, driving absolute yields back to levels not seen since before the global financial crisis.

For the first time in years, credit markets potentially offer a way to achieve long-term return objectives via income alone, without the drawdown risk inherent in equity markets. In addition, from an asset allocation perspective, the traditional role of fixed income as a diversifying asset has been restored, with the potential for meaningful returns from the asset class if central banks were to ease policy in a future downturn. Two factors could create highly differentiated outlooks at an issuer level Until there is greater confidence that inflation is under control and that the gro...