As discussed in our macro credit outlook (see here), we expect spreads to end 2022at similar levels to today but with a number of potential headwinds on the horizonthat could see wider ranges compared to what was an ultra-low volatilityenvironment for HY and broader credit this year. This will especially be the case ifmarkets attack the Fed's well choreographed forward guidance at some point in thefirst half of the year when its clear that inflation will remain elevated for longer thanthe market and the Fed has recently expected. This should mean a more challengingback drop for spreads in the first half of the year before tightening in the second half.

That being said, our base case is that we are still mid-cycle with above-trend growthalbeit with the risk that there are increasing late-cycle indicators flashing shouldmarkets test central banks. A move away from broad corporate de-leveraging topotential credit deterioration through acquisitive growth strategies and increasingshareholder returns should be closely watched.