Massive infusions of central bank liquidity successfully stabilised global credit markets in 2020, even as a pandemic driven flight to quality pushed already low sovereign yields even lower. This dual trend produced strongly positive returns across most fixed income sectors.
However, investors face a more challenging environment in 2021. With short term yields at ultra-low or negative levels and the US yield curve steepening as economic growth and inflation expectations revive, interest rate risk could become a critical issue.