Nontraditional fixed income sectors aided investors, and traditional fixed income sectors did little to blunt the effects of rising interest rates on fixed income portfolios in 2021, a year in which the Bloomberg US Aggregate Bond Index (the “Agg”) returned negative 1.5%. Below-investment-grade credit and securitized credit generally outperformed all major segments of the Agg. (Figure 1) U.S. Treasuries were the worst-performing sector within the Agg in 2021, as the yield on the 10-year Treasury note rose 60 basis points (bps) yearover-year (YoY). The U.S. investment grade (IG) corporate credit market experienced record issuance, largely driven by low borrowing costs. Despite spreads modestly tightening YoY, the sector returned negative 1.0%. 1 We expect similar themes from 2021 to persist in 2022 and stress the importance of active management of interest rate positioning and sector allocation for fixed income investors, as spreads tightened across much of the fixed income universe throughout 2021.