Corporate Bonds
We review our Model Bond Portfolio performance for Q2 and look ahead as fixed income markets move beyond the US-Iran conflict, which is finding its kinetic equilibrium. Valuations and growth differentials are moving against continued US Treasury outperformance.
Corporate health remains supportive of tight credit spreads in both the US and Europe, but a growing divide is emerging beneath the surface. Investment-grade issuers continue to strengthen, while lower-rated borrowers face mounting pressures. Credit markets are pricing resilience, leaving investors vulnerable should corporate fundamentals begin to deteriorate.
Markets keep buying the dip because liquidity remains plentiful. That buffer lasts through 2026; the bigger question is what happens when it thins in 2027.
With central banks largely on hold, the return of a lower volatility environment is bringing carry trades back into focus. We outline the most attractive carry opportunities across global fixed income markets.
We recommend increasing exposure to spread product as the US economy transitions back into a low rate vol regime.