In his 1974 children’s book, The Tiger’s Bones, the English poet Ted Hughes wrote that “Nothing is free. Everything has to be paid for.”
KEY POINTS
- Soaring inflation and higher rates saw US corporate credit endure consecutive negative return years in 2021 and 2022 – a first for the asset class
- Higher income potential and expectations of a peak in the Fed Funds Rate have driven investors back to high quality credit
- Today investors can access the US investment grade market at attractive all-in yields of around 5% to 6%
Looking at the healthy state of the US corporate credit market today - the jewel in the crown of the global credit universe - one could be forgiven for forgetting about the heavy price paid by all fixed income assets to get to this point.
Today, parallels can be drawn between the time Hughes was writing in the mid-1970s and the impact of spiralling inflation on financial markets. The recent inflationary spike - to levels not witnessed since the 1970s - and the Federal Reserve’s (Fed) subsequent aggressive pace of policy tightening saw the ICE BofA US Corporate Index suffer consecutive negative return years in 2021 and 2022 for the first time since records began in 1973.
You can now read the full whitepaper at the link below
