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BofA Merrill Lynch Global Research – A US Economics Report – Sunday, 09 December 2012

Overview – 2013 Fixed Income Outlook

We hold a favorable outlook on spreads to begin 2013 and recommend an overweight on corporate and securitized credit as well as agency MBS, versus Treasuries. Beyond the initial spread tightening, further compression will likely be difficult and the impressive returns of recent years are unlikely to be repeated as rates rise moderately over the year. A substantial increase in interest rates later in the year could pose a risk to our outlook and fixed income total returns.

 

Read the full report here.