The US Fixed Income Weekly

Research evidence excerpt

The US Fixed Income Weekly

lue. At the same time, surveys show institutional

investors remain heavily committed to AI, semiconductors and cyclical growth themes.

While we remain constructive on the secular AI investment cycle, we are increasingly

sympathetic to the view that investors should, per Michael Hartnett, “fade the runners,”

emphasizing quality and valuation discipline over momentum-driven risk taking.

Credit fundamentals remain supportive. Investment-grade inflows continue at a robust

pace, issuance is being absorbed efficiently, and earnings expectations remain favorable.

High-yield and leveraged-credit markets still benefit from healthy growth and improving

corporate fundamentals, but dispersion is increasing as investors discriminate more

carefully among lower-quality credits and sectors exposed to technological disruption.

AI-related spending remains a powerful support for credit demand, though future

returns are likely to require greater selectivity as valuations tighten.

Across securitized products, the combination of strong technicals, healthy fundamentals,

and attractive relative value remains compelling. Issuance is running ahead of last year

across ABS, CMBS, and agency sectors, but demand continues to absorb supply with

little evidence of fatigue. We continue to favor carry, structure, and security selection

over broad beta exposure. Preferred areas include AAA CLOs, agency and non-agency

CMO floaters, senior CMBS, SASB floaters, select data-center securitizations, and

higher-quality ABS sectors. Data centers remain a particularly attractive theme: while

regulatory scrutiny and permitting constraints may slow future development, those

same factors could enhance the scarcity value of existing assets and strengthen

incumbent operators.