Income

The reopening of the Strait of Hormuz has reduced inflation concerns. While tight credit spreads limit upside, fundamentals and technicals remain supportive of fixed income markets. We are modestly constructive but cautious, particularly on private credit, where complacency around liquidity risks appears underappreciated.

Collateralised loan obligations (CLOs) are securitisations backed by a large pool of senior secured corporate loans, which are financed partly via selling bonds to investors.

Foreign exchange markets have taken centre stage again in recent weeks. President Trump’s apparent indifference to the relatively steep dollar depreciation trend of late has raised a few eyebrows and added fuel to the dollar fire.

Explore the Global Credit Outlook 2026: A concise overview of key trends in global credit markets, from macroeconomic shifts and corporate fundamentals to AI-driven investments and market opportunities. Gain insights to navigate the year ahead effectively.

As we approach 2026, Fixed Income markets are shaped by weaker fundamentals, though lower uncertainty may reduce the likelihood of a catastrophic decline. That said, volatility will remain a defining feature. We believe the year ahead holds great potential for active managers who remain steady at the wheel: cautious but nimble.

Collateralised loan obligations, or CLOs, have become an increasingly popular asset class within global fixed income.

You can now watch the replay of our webinar: The new multi-plural world: Macro divergence meets yield

With strong fundamentals, broad region and sector diversification, and a track record of weathering financial crises, emerging-market investment-grade (EM IG) bonds have evolved into a high-quality asset class, in our view. Yet, despite a robust risk-return profile, EM IG remains significantly underrepresented in actively managed, dedicated strategies.

The turbulent start to 2025 has sent many investors seeking alternatives to US assets, but in our view European fixed income can offer more than just diversification.

While tariffs have done meaningful damage to the economic outlook and raised volatility in rates markets, the softening of the US stance has restored confidence in credit returns for 2025.

The question for investors now is how much of the macro risk remains, and how well that risk is being reflected in asset valuations.

The high yield bond market reopened in Europe last week after a three-week hiatus triggered by the US tariffs fallout. Aside from a private placement by Very Group on April 10, the last public European high yield deal was from UK homebuilder Miller Homes on March 31, so we were interested to see how the first post-tariffs deal would be received.