The U.S. 10-year yield was quite volatile, fluctuating in a 100 bps range between 160 and 260, and ending up a mere 10 bps higher for the year. But it was still better than most other major asset classes which saw all risk and no reward.
Fewer uncertainties surrounding the Fed’s policy decision probably helped, but the renewed sell-off in oil is a big concern for all credit classes. We recommend caution and a neutral stance towards credits at this juncture.
Based on the four key features of the current macro environment: global disinflation, monetary conditions divergence, an extended bull market, and sub-par economic performance, 1998 ticks all the boxes.