Higher yields, wider spreads: Has the risk-reward balance shifted?
Higher interest rates and wider credit spreads have challenged fixed income markets, while also changing prospective return levels. What does the repricing mean for European investment grade bonds and the Low Carbon Corporate Bonds fund?
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Interest rates have risen significantly, particularly in the US, as inflation concerns, energy prices and resilient economic activity have influenced markets. In Europe, credit spreads have also widened, with uncertainty surrounding France adding another source of volatility.
In this quarterly update, host Jørgen Johan Mørk is joined by Daniel Berg, Head of International Fixed Income, to examine what these developments mean for the Low Carbon Corporate Bonds fund. They discuss recent fund performance, the impact of higher rates and credit spreads, and how current valuations differ across parts of the European and US credit markets.
The conversation looks ahead to the coming months, exploring the balance between political and market uncertainty on one side and higher running yields on the other. Daniel also shares his perspective on where credit markets may now offer better compensation for risk and what could drive performance from here.