January was the fifth consecutive month where dollar bonds in our universe ended the month lower with 92% of bonds in the red. The US 2Y Treasury yield soared 44bp in January after market participants increased expectations of the US Federal Reserve’s first rate hike in March 2022 from the initially expected June. With that, a faster balance sheet runoff and the possibility of a fourth rate hike have risen after the Fed sounded hawkish in its January meeting. The probability of a 25bp rate hike in March rose from 20% at the start of December 2021 to over 50% at the start of January to 94% as of February 3. The 10Y Treasury yield too jumped 29bp to 1.80% at end-January. This led to a terrible month for bonds, especially investment grade (IG) bonds that are more sensitive to interest rate changes compared to high yield (HY) bonds, all else equal. 97% of IG dollar bonds ended January in the red, compared to 85% of HY dollar bonds that ended the month lower. Bloomberg noted that a global index of IG bonds posted their worst start to the year in over two decades, with total return losses of 2.2%.

For more data on issuance volumes, the largest deals and top gainers and losers in January, click on the button below:

Read the full January 2022 report

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