US Fixed Income Strategy: The US Fixed Income Weekly

Research evidence excerpt

US Fixed Income Strategy: The US Fixed Income Weekly

ting markets have limited room for

disappointment. Long risk is still viewed as crowded, while investor surveys show

skepticism that the Fed will deliver all priced hikes even as investors remain

underweight US duration. The market consensus remains close to “no landing, no Fed

hike, no AI capex cut,” leaving H2 vulnerable to contrarian shocks from weaker growth,

higher rates, a stronger dollar, or an AI-related equity correction.

Credit and spread sectors continue to benefit from attractive all-in yields and strong

demand, but dispersion is rising. High grade remains the clear standout, with robust

inflows and active new issuance generally trading tighter after pricing. High yield and

loans are more differentiated: lower-quality leveraged credit may be nearing an

inflection point as stronger growth and improved earnings expectations compete with

refinancing pressure, negative ratings migration, and AI disruption risk. Loans have

benefited from higher rates, and B3 loans appear to offer a cleaner compression

opportunity than CCCs. In Europe, the oil/rates divergence remains supportive for credit,

while hyperscaler issuance and AI-linked sector rotations are creating pockets of

indigestion and relative-value opportunity.

Securitized products remain attractive, but tight spreads argue for quality over beta.

Strong issuance is being absorbed by demand, and expected 2H supply moderation

should support technicals, but crowded positioning leaves less margin for error. The

preferred stance is to stay invested while emphasizing liquidity, structural protection,

and durable cash flows, including AAA corporate CLOs, agency and non-agency CMO

floaters, senior CMBS/SASB, CRE CLOs, data-center securitizations, and small-ticket