UBS On-Air: Market Moves Top of the Morning: Fixed Income Strategist - Almost ample
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Oct 29, 2025 Leslie Falconio, Head of Taxable Fixed Income Strategy at UBS, and John Murtagh, Fixed Income Analyst, delve into the current state of fixed income markets on a crucial Fed Day. They discuss YTD performance, predicting further rate cuts and the implications of monetary policy on market behavior. John highlights tight funding conditions and SOFR spikes, while Leslie points out vulnerabilities for fixed income investors, including inflation threats and sentiment risks. Together, they provide insights into strategic shifts in allocations toward securitized products.
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Why 2025 Favored Fixed Income
- Fixed income delivered strong 2025 returns driven by spread compression and falling Treasury yields.
- Carry and lower volatility boosted total returns across most income sectors.
Prepare For Year‑End Volatility
- Expect higher volatility into year-end from window dressing, the shutdown unwind, and tariff news.
- Use volatility as an opportunity and prefer high-quality bonds rather than fleeing spreads.
Market Watches Fed's Rhetoric Over Cuts
- CIO expects a 25bp cut today and another in December, with the market pricing cuts earlier than the Fed's projections.
- The key market focus will be the Fed's rhetoric in the Q&A, not just the cut itself.