According to the Economics Research Team at Goldman Sachs, “While our best guess is that the search for yield will continue in 2013 and that spreads will probably continue to grind lower, our baseline forecasts show limited upside in the year ahead: low single-digit returns in the case of Investment Grade credit and high single-digit returns in the case of high yield credits.”

In addition, outside of specific pockets where spreads are still wide in absolute terms, the smaller cushion against a rise in risk-free rates means that it is easier to envisage situations where the total return on credit assets is eroded. “By contrast, the equity market offers more upside optionality to our forecast view of a sequentially improving growth outlook towards the end of 2013, and more firmly in 2014.” they suggest.