Swiss Life Asset Managers does not anticipate any further fall in credit spreads but instead expects interest rates to rise. It remains defensively positioned with respect to interest and credit risks.
Credit spreads on corporate bonds are at record lows despite deteriorating credit quality and longer maturities of new bonds. Long-term bond yields are also relatively low compared to economic growth and inflation. This is having a negative impact on real interest rates.
As central banks consider the inflation to be temporary, they are sticking to their monetary stimulus policies. This is leading to low real yields on EUR and US government bonds. Even corporate bonds are failing to yield positive real interest rates on an inflationadjusted basis, and high-yield securities with the same maturity profile also only offer meagre remuneration.
Swiss Life Asset Managers does not expect credit spreads to fall any further. It predicts a further rise in interest rates and is maintaining its defensive positioning with regard to interest and credit risks.