2021 showed what financial repression by central banks means. As a result of vast bond buying programmes, the volatility of credit spreads collapsed with the average in EUR being about a third, and the average in USD roughly half of its historical average.

Credit spreads were tight in 2021 with minimal dispersion as credit curves flattened along the risk and duration dimension. Investors were forced to load up on risk to hope for any kind of positive returns, especially given the significant rise in interest rates seen in the first few months of the year. However, while
credit spreads remained mostly unchanged, rates had quite a rollercoaster ride as the economic slowdown induced by the Delta variant in the summer relentlessly drove yield lower despite soaring inflation numbers, before settling in a relatively wide range. We believe that 2022 will be different, as bond-buying programmes are gradually phased out. 

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