Nordic High Yield: 2021 – a strong year for credit
Seldomly a year developed as close as our scenario has predicted. A review of 2021 and outlook into 2022 for the credit market.
The year 2021 turned out to be a rare event, namely a year in which our central scenario for the year panned out, at least in broader terms. The year started with quite strong covid restrictions to curb the spread of the alpha variant of the corona virus. Restrictions led to weaker GDP growth at the start of the year. Vaccine roll-out and a strong belief in reopening among market participants still made for strong and relatively stable markets, however. Economic growth picked up sharply from the spring and continued through the year underpinning market developments. The sailing was not completely smooth as the Delta variant raised concern from early summer onwards but as the vaccines turned out to be efficient against the variant and also because the initial spread of the Delta variant took place through the summer and early fall, Delta did not lead to large deviations from the growth trend and did not impact markets strongly.
The reopening story being the main theme for 2021 made for strong credit markets in the Nordics, particularly for high yield. Investment grade also performed well with an initial spread tightening through February and stable markets thereafter. Also for high yield a substantial part of spread tightening took place in Q1 but as the Nordic high yield market lagged developments in the US and European high yield markets from 2020 we saw a continued spread tightening through most of the year, even in the face of record issuance activity.
Nordic credit markets 2021
Where 2020 stood out as the year with the largest credit spread movements ever seen in the Nordic credit markets, 2021 was marked by a strong and also stable credit market both for investment grade and high yield. Strong belief in vaccines and the underlying reopening scenario protected credit spreads against pandemic headwinds from the Alpha and Delta variants of the virus.
2021: Investment grade - a year of stable credit spreads
Volatility in high yield spreads was also quite low in 2021 but here we saw a continued credit spread tightening throughout most of the year, although spread tightening was strongest in Q1.
