In recent weeks, the ‘flight to safety’ approach has ensued within financial markets as investors increased their exposure to safe haven assets, given the current economic and geopolitical backdrop. The bearishness exhibited by the market could be justified by the hawkish monetary policy, rampant inflation and geopolitical crisis. As a result, corporate credit spreads have widened with the rise in sovereign bond yields. Moreover, corporate credit spreads have remained elevated during the recent pullback in sovereign bond yields. At the time of writing, the yield on the Bund stood at 1.13 per cent, a level last seen in 2014 and significantly above the level seen towards the end of 2020 when the Bund was trading in negative territory. Despite the higher Bund yield, European corporate bond spreads have widened markedly. European investment grade bond spreads have increased by circa 110bps since the start of the year to circa 204bps, while wider spreads have been more notable in the European high yield segment of the credit market as spreads have increased by circa 326bps to 645bps since the start of the year. The three major themes influencing credit markets are all interconnected.