Duration heavy IG bonds tanked

In anticipation of a strong economic recovery ahead of us, long term interest rates have spiked from their historical lowest levels This has paid its toll For example, US investment grade bonds suffered a performance of ~4.5% on a YTD basis as these bonds are highly interest rate sensitive with an average duration risk of around 7 years On the opposite, US loans generated a solid plus of around +1% on a YTD basis, given the asset class’ low interest rate sensitivity Loans have a floating rate mechanism and are priced based on a fixed credit spread combined with a (money market rate (i.e. libor rate) Depending on the respective credit rating, loans earn currently an average yield of ~4% p a in USD.

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