Rates have gone parabolic amid surging inflation and central banks that have shifted their views on inflation from a transitory problem to fighting it however they can.

Just six months ago the market priced in only two rate hikes by the Federal Reserve until the end of 2023 despite ever-increasing inflation numbers. Fast forward to today and the market sees 12 hikes (by 25 bps each) and attaches a 70% probability of a 50 bps increase in May. So far, the credit market has taken it surprisingly well although we view the latest tightening of credit spreads as a more technical-driven recovery of corporate bonds. The macroeconomic backdrop has been deteriorating for some time, and the ongoing high inflation paired with rapidly tightening financial conditions will continue to squeeze consumers and corporate profits. 

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