January often sets the tone for the rest of the year. So far, 2022 has been off to a bad start with both sovereign bond yields and credit spreads rising.

Hence, total returns are negative with EUR  corporate bonds down 66 bps and USD corporate bonds suffering a more pronounced 346 bps loss due to the stronger rates move and longer duration in the USD segment. Expectations of faster monetary policy tightening clearly did not sit well with investors even though we are still currently in the easing mode as central bank balance sheets are increasing. While certainly not a good start to the year, the reaction of credit spreads was quite muted with EUR and USD spreads only widening by 7 and 8 bps respectively. Especially given the sell-off seen in the equity market, corporate bonds were relatively well supported. That said, it might have given us a glimpse into what awaits us in 2022.

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