UBS On-Air: Market Moves Fixed Income Conversation Corner with Jeffrey Sherman (DoubleLine) and Leslie Falconio (UBS CIO)
9 snips
May 12, 2025 
Join Jeffrey Sherman, Deputy Chief Investment Officer at DoubleLine Capital, and Leslie Falconio, Head of Taxable Fixed Income Strategy at UBS, as they navigate the fixed income landscape amid economic uncertainty. They dive into the implications of U.S. trade policies, the importance of risk management, and strategies for investing in shorter-duration bonds. The conversation also covers the complexities of mortgage-backed securities and current economic vulnerabilities, emphasizing the need for liquidity and caution with high-yield bonds.
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Trade Policy Dampens U.S. Exceptionalism
- The initial excitement about U.S. exceptionalism post-election has reversed due to trade policy uncertainty and market fatigue from headlines.
- Despite spread widening, spreads remain tighter than average; investors should seek better risk premium reflecting current market uncertainty.
Prefer Stable, Shorter Maturities
- Avoid credit risk in companies vulnerable to tariffs and focus on stable, well-underwritten credit with good interest coverage.
- Favor shorter maturities to reduce sensitivity to spread movements and seek yields around 5% to 5.5% for stability and income.
Favor Belly of Yield Curve
- The fixed income market prefers the belly and front of the yield curve given uncertainties around the long end.
- Agency mortgages offer higher coupons than investment-grade corporates despite volatility, providing value in uncertain times.