The Fed’s rate hike path in 2022 is driving up bond yields in all markets. For example, the yields of short-term bonds (1-3 years) in high yield and investment grade bottomed out in 2021 and climbed to a high of 10.2% and 5.3%, respectively, by the end of September 2022. The latter marks a record high in the last 10 years. This is accompanied by a negative YTD-performance of the index of -5.4%, not much less than the loss of the short-term high yield index at -5.9%, confirming that the negative performance this year was mainly caused by rising interest rates rather than fundamental credit concerns. With the economy cooling ahead, credit spreads could widen further in the short term, putting potentially additional pressure on bond markets. However, with these high interest rate levels, bonds offer some “yield protection” at the same time.