Global Private Banking Investment Outlook Report Fixed Income Rate volatility remains elevated on Rate volatility has been detrimental to bond returns the back of hawkish central banks’ rhetoric and high inflation prints, YTD 3M which have been detrimental to 0% bond market returns. The silver lining is that bond valuations price -5% in most of the rate hikes we foresee and have gained in attractiveness -10% relative to other asset classes, such as equities. As a consequence, we -15% hold an overweight in fixed income, but we remain cautious and focus on quality corporate credit, mostly -20% in investment grade (EM and DM) -7.3% -7.8% -8.1% -5.0% -4.0% -6.3% -7.2% -4.9% and at the “short-to-medium” part -25% -15.2% -14.0% -19.2% -12.9% -13.4% -19.8% -21.3% -17.3% of the yield curve. The flat or even US US US I US Y U Y M  r­ M S € M S € L inverted yield curve shapes do not Treasury Treasury   USD Linkers Un‚eƒ„eƒ adequately compensate for taking additional duration exposure in our opinion. We expect DM sovereign Source: HSBC Global Private Banking, JP Morgan, BOFAML indices as at 22 November 2022. Past performance is not a reliable indicator of the future performance bond yields to remain volatile in the short-term but to decline over 2023 as inflation and economic growth head south and corporate credit spreads continue to widen, especially for lower-rated issuers. US Treasury valuations have improved relative to equities Overweight 0% UST Index Yield - S&P 500 Enin Yield Government bonds: UK Gilts -1% Credit and EM: US, European and -2% UK IG; Australian and New Zealand -3% corporate bonds; GCC and Mexican Hard Currency bonds; Brazilian -4% HC corporate bonds; Mexican and Yields Brazilian Local Currency bonds -5% Underweight -6% Government bonds: German -7% and Japanese government bonds, -8% European Periphery debt Nov-07 Nov-09 Nov-11 Nov-13 Nov-15 Nov-17 Nov-19 Nov-21 Credit and EM: Argentinian, Turkish Source: HSBC Global Private Banking, Bloomberg as at 22 November 2022. Past performance is not a and Ukrainian Hard Currency bonds; reliable indicator of the future performance Turkish and Indian Local Currency bonds, Russian debt in Hard and Local currency 28