H1 2022 produced record downside first halves for many asset classes.

Sovereign yields in particular saw some sustained rises across the curve as central banks moved, the Federal Reserve in particular, to aggressively hike rates to combat the kind of inflation prints not seen for many decades. As worries grew that the fiscal tightening would unduly affect activity and even provoke recession, commodity prices turned down in a brutal way falling nearly 20% from early June highs with the exception of energy prices although even crude prices have recently come off sharply. The Fed remains concerned that inflation could become entrenched and as the pace of their tightening exceeds the Bank of England’s, Sterling has paid the price.

Credit spreads continued to widen but underlying market activity still remains relatively healthy. Primary market issuance levels are markedly down, especially in High Yield, but some Investment Grade issuers are managing to print albeit only at yields that suit investors. We took a new 5-year senior unsecured issue from RBC paying 170bp over Gilts, funding this with a sale of 3-year floating covered risk from the same issuer. BAE systems redeemed our June 22’s with cash from their healthy balance sheet and we also continued to sell down our infrastructure holdings, selling more INPP and HICL Infrastructure.


The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.

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