Swiss Life Asset Managers expects continued low credit spreads and stable interest rates. It is continuing to overweight credit risks and short durations.
Despite an unprecedented economic slump, 2020 was a good year for bond investors. Spreads on corporate bonds are almost back to their pre-crisis level. For the first time, the low total returns are no longer compensating investors in US corporate bonds for the anticipated inflation.
Negative-yielding bonds are now at record levels. Swiss Life Asset Managers considers it possible that they could become even more expensive due to the expansive monetary and fiscal policy in developed countries. Accelerated global economic growth, cash parked in money market funds and technical and fundamental factors should ensure further yield compression.
Swiss Life Asset Managers expects the positive development of low credit spreads and stable interest rates to continue over the next three months. Despite the increased risk, it remains overweight in credit risks and short durations.