Nevertheless, most credit managers, 70 percent, said they plan to maintain their current risk levels.

Unsurprisingly, retail is the highest concern for the respondents, with 33 percent of credit managers naming the retail sector among their most concerning. Over one-in-four managers, 27 percent, said that health care was among their largest concerns. Most managers in commercial mortgage-backed securities also named shopping centers and the retail sector in general as the biggest sector risk in their asset class.

U.S. issues no longer lead demand for high-yield bonds; instead, managers are more diversified among U.S., European and emerging market high yield bonds, U.S. and European leveraged loans, and mezzanine debt.

“High yield is no longer powerful when you can get Treasurys and money markets with relatively meaningful yield, you no longer have to stretch,” said Smears. “That realty hits peripheral markets like emerging-market debt first.”

Municipal managers are also more bullish, with fewer managers calling for yield increases and many arguing that high yield municipal bonds are superior to corporate high yield.

Rising house prices and lower federal taxes may be improving the picture for U.S. municipal managers, said Smears, as state and local issuers should be able to expand their tax bases.

Emerging market managers still expect some moderate tightening and continue to favor local currency denominated debt versus hard currency debt, but by a narrower margin as volatility in currencies has increased.

Russell believes that many managers continue to lowball the potential for more volatility across fixed income markets.

“We feel as rates normalize there will be more volatility in the markets, you can see that in emerging markets,” said Smears. “Last quarter, emerging markets managers were starting to see weakness in local currency debt, and decided it was an opportunity to buy, but they were a bit early and now that level of bullishness has moderated significantly.”

In such an environment, Russell’s managers are employing long volatility strategies to benefit from dislocations in bond markets caused by interest rate increases and quantitative tightening.