The case for floating rate credit

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04 December 2025 Fixed income

With central banks cutting rates, investing in bonds linked to short-term rates might seem odd. But as official short-term rates settle around 3% – 3.5% in the US and 2% in the eurozone, corporate spreads of 3% or more mean that floating rate credit can still offer attractive income and do so with lower volatility.

Default risk is relatively low, in our view, as companies have managed higher interest rates well and balance sheets are generally healthy.

Attractive yield despite being focused on shorter dated bonds

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