Two months after the latest Bank of America credit investor survey found that fixed income asset managers were most concerned about the Trump tariff and trade war trifecta of i) trade war, ii) China and iii) geopolitical risk, the latest, November credit investor survey released over the weekend saw a big change at the top of biggest concerns, with "rising interest rates" jumped to first place and mentioned by 66% of respondents, up from 35% in the prior, September, survey. And while investors remain very concerned about the trade/China-heavy categories "Trade war", "China" and "Geopolitical risk", which have shifted to 2nd-4th spot, clearly overall risks have increased driven primarily by the recent substantial increase in interest rates. Other concerns include deflation/recession, inflation, asset bubbles, fiscal policy and event/LBO risk. While it has become trendy to blame the October volatility on last month's jump in the 10Y yield, Bloomberg notes that concerns about rates seem as much driven by headlines as by real-world changes, while Bank of America notes that it is struggling to detect anything in terms of what drives this increase in concerns about rates. Here, it notes that the recession probability from its survey was little changed at 15.9% (fig.2), and there was actually a small decline in the proportion of investors concerned about inflation. To BofA, this may be acknowledging that "rates are now going up because they can, on rising dollar hedging costs." Or perhaps Millennial "credit investors" are now so clueless they have no idea what rising rates means for inflation expectations or recession odds. And while the bank cautions that one of its biggest concerns is that the European sovereign crisis gets much worse due to Italy's fiscal challenges, investors once again demonstrate cognitive dissonance - or perhaps simple financial cluelessness - and agree that while Italy probably gets worse (Figure 3), they are getting less concerned (Figure 1). Go figure. Meanwhile, as Bloomberg also observes the investing herd may simply be reflecting the media: the volume of stories mentioning higher yields surged in October, mostly to explain the stock selloff. As a result, credit investors - who are supposed to be far more intelligent than their stock-focused peers - have transposed this fear onto their own domain. That said, two things did change between September and November: one was the rise in the 10-year TIPS yield above 1% for the first time in years. At the same time, however, 10Y breakevens dropped sharply from 2.15% around mid-September to as low as 2.03% earlier this month, following the plunge in oil prices. If anything, this would imply lower rates in the future, not higher. In terms of positioning within the asset classes, High Grade investors sharply reduced exposure to the Energy sector (Figure 25), as oil prices declined, whereas their HY counterparts actually added meaningfully (Figure 26). Asked about views on risk-adjusted excess return performance across the ratings spectrum, HG investors favor BBBs (48%) despite rising concerns about an avalanche of fallen angels, while HY investors support Bs (40%). However, cross credit investors, that can be active in both HG and HY, support a barbell strategy around BBBs, using A-rated and higher and BB-rated paper. Another notable observation in the latest survey is that credit investors turned notably more bearish on fundamentals (Figure 23), a shift that was especially pronounced for HY investors (Figure 24). As credit investors also expect declining supply volumes (if offset by soaring leveraged loan issuance), this more negative outlook for fundamentals is perhaps related to the recent decline in oil prices and evidence of input price pressures - or maybe the correction in equities. In terms of flows, HG investors continue to see only small inflows and expect that to continue, while HY investors are experiencing small outflows. Finally, in addition to the standard concerns US credit investors wrote in the following: Increasingly tighter financial conditions: monetary policy becoming too restrictive and unabated balance sheet unwind; Crowding out due to increasing UST issuance, Eurozone existential issues; Not necessarily a currency war, but continued upward pressure on the dollar; Italy's impact on the EU; Overly hawkish Fed; Trade war; Refinancing risk.