August 2025
Please see below for a series of fixed income and currency macro viewpoints from Insight’s lead portfolio managers.
| Insight Spokesperson | Quote |
|
Francesca Fornasari
Head of Currency  |
Dollar doubts deepen as policy shifts bite "Markets remain focused on the implications of recent policy volatility for the trajectory of the US economy and asset performance. Concurrently, confidence in US 'exceptionalism' has waned and support for the USD has weakened; the latter driven by concerns over reduced foreign capital inflows and increased hedging of long USD exposures. We anticipate further USD depreciation in the second half of 2025 but note that seasonal positioning means this could take time to materialise, at which point we will look to engage accordingly." |
| Harvey Bradley Co-Head of Global Rates Investment  |
ECB leads, Fed lags – US bonds poised to shine "The European Central Bank was able to bring forward its easing cycle and is now far ahead of the Fed. If the Fed catches up next year it would likely be a positive for US Treasuries out to 10 years and with Treasury yields already higher than European governments, it could lead to significant outperformance for investors holding US bonds." |
| Peter Bentley Global Head of Fixed Income  |
Fed pressure fuels curve steepening "Our economic outlook for the US is for a moderate and uneven slowdown. Fluctuating political pressure on the Fed creates turbulence in Treasuries, so we can envisage further curve steepening, with shorter yields declining and longer-term yields rising if pressure on the Fed’s independence continues or worsens." |
| Brendan Murphy Head of Fixed Income, North America  |
Tentative signs of tariff-related inflation "For now, tentative signs of tariff-related inflation in categories like household furnishings and supplies, appliances and sporting goods may keep the Fed taking a wait-and-see approach to cutting rates. It may help keep the window open for investors to move out the yield curve and lock-in compelling yields in fixed income. We expect rate cuts will likely follow later in the year, however, potentially benefiting those exposed to interest rate risk. Although the labor market is currently holding firm in a “low hiring, low firing” disposition, the FOMC will be sensitive about any possibility of the economy tipping into a feedback loop of job losses, and we believe it would be minded to “look through” tariff related inflation if need be." |
|
Jill Hirzel |
Eurozone nears easing end – unless recession hits "The eurozone is in a different position to the US. With inflation having already reached the target of 2%, the European Central Bank may be very close to the end of its easing cycle. We believe one more rate cut is likely, reducing the deposit rate to 1.75%. However, if the single-currency area was to descend into outright recession, it would likely increase the potential for further rate cuts beyond that." |
| Nate Hyde Senior Portfolio Manager  |
Low spreads, high uncertainty – go tactical, go active "Fixed income yields are attractive but spreads remain low even as uncertainty is unusually high. This has left generic credit ‘beta’ fair value at best. In such an environment, we think active managers can add significant value by holding risk tactically low for now, while keeping their eyes open and standing ready to capitalize on market dislocations. So for those considering fixed income, going active rather than passive in the current environment may offer clear advantages." |
| Adam Whiteley Head of Global Credit  |
Tariff tolerance high, but credit has no cushion "Markets have got comfortable with the likelihood of an additional 10% added to global tariffs, as they reason it would only be a small hit to growth and from higher inflation. So, the market is calling the bluff on some of the elevated figures for tariffs that are being bandied around. However, there is very little margin for error for credit spreads; there is not a lot of risk premium priced in for the various potential challenges that the market may face from tariffs or any other negative surprises." |
| Scott Zaleski Head of US Multi Sector Fixed Income  |
Strong demand, shrinking supply holds credit firm
We could be in the sweet spot for fixed income; a high-yielding environment with slowing, but positive, GDP growth and stabilized inflation. In each of the last 25 calendar years, the Bloomberg "Agg" bond index always delivered a positive return when beginning the year with a yield above 4%. Looking back further over 50 years, this only failed to happen twice, and these negative years were followed by strong 24-month returns. This year began with yields over 5% and they remain so – meaning that even though credit spreads may be relatively tight, fixed income could offer compelling income and ballast within a portfolio." |
| Erin Spalsbury Head of US Investment Grade  |
Steady growth, solid fundamentals should keep the IG rally going "Even as some may wonder if the best gains in corporate bonds are behind us, demand remains strong and net supply has been dropping. Fundamentals also look robust. M&A activity has been slower than expected, with a notable shift toward equity-funding, which has been good for leverage metrics. History suggests investment grade credit performs well when economic growth is steady, even when low. Given that we expect softening growth and further Fed rate cuts, lower-risk investment grade credit, complemented by some US Treasury exposure for liquidity, looks like a compelling approach." |
|
James DiChiaro
Senior Portfolio Manager  |
High yield’s quiet strength "The consensus around real US GDP is that it will slow over the next year, but without tipping into an economic contraction. It might be surprising to hear, but this could be a compelling environment for high yield corporate bonds. We think default risks remain relatively contained. A constrained growth environment for equities implies companies will have a harder time delivering organic growth for shareholders. However, nominal economic growth should remain quite positive over the next twelve months and lessens the probability that issuers will struggle to meet their existing debt commitments on average. High yield credit could be a dark horse over the next few years." |
| Damien Hill Senior Portfolio Manager  |
Sterling credit stays strong amid policy uncertainty "In the UK we expect the Bank of England to gradually cut rates broadly in line with market pricing, but monetary policy uncertainty remains in the face of inflation remaining above central bank targets, a resilient labour market, and mixed economic impacts from the Labour Party’s shift in fiscal policy. The demand picture for sterling investment grade credit remains resolute, as limited supply of new issues has allowed for strong technical support for spreads, with demand significantly outstripping supply." |
