Evangelia Gkeka, Senior Manager Research Analyst, Fixed Income, Morningstar
The first quarter of 2023 was characterised by major swings in inflation and rate-hike expectations. Markets rallied in January on strong economic data, better-than-expected corporate earnings, and easing headline inflation figures. However, February brought higher-than-expected inflation numbers. In March, the failure of two US banks (Silicon Valley Bank and Signature Bank) and the forced takeover of Credit Suisse by UBS in Europe created fears of a global banking crisis and led investors to move to safe assets, including bonds. By the end of the quarter, these fears abated, and investors started focusing again on potentially more accommodative monetary policy steps in the quarters ahead. The table below exhibits the performance of key fixed-income indexes for each quarter of 2022, the full year of 2022 and the first quarter of 2023 (figures in percentages). As illustrated, the recovery over the past couple of quarters has been broad-based across government, investment-grade, and high-yield bonds.