Global economic momentum decelerated in the fourth quarter. An inversion of two- and five-year yields and shifting growth expectations contributed to significant stock market volatility and wider credit spreads. Long duration investment-grade corporate bond spreads widened 47 basis points to 200bp, mostly due to falling U.S. Treasury yields.
Merger-related issuance created a number of opportunities to buy credits at attractive spreads, particularly among consumer noncyclicals where the management teams are focused on reducing debt. Managers increased the underweight to duration as U.S. Treasury rates fell.