Why AT1s could now be attractive?

For most of 2022, determining the right time to buy fixed income felt like trying to catch a falling knife, as yields continued rising, driven by increasingly hawkish central banks and their concerns over inflation. However, sentiment towards fixed income started to change in the fourth quarter as yields hit decade highs, credit spreads had widened, and market participants anticipated that rates were close to the peak as US inflation had started trending lower. Fixed income markets have started 2023 on the front foot, with yields rallying throughout January.

So, what is the outlook for AT1s?