UBS On-Air: Market Moves Top of the Morning: Fixed Income Strategist - Back to school prep
Aug 12, 2025
Leslie Falconio, Head of Taxable Fixed Income Strategy Americas at UBS, and Barry McAlinden, Senior Fixed Income Strategist at UBS, share their insights into the fixed income landscape. They discuss how recent payroll reports impact interest rate decisions and labor market trends. The duo highlights the appeal of fixed income amidst rising interest rates, emphasizing the importance of quality assets and strategic diversification for investors. Their analysis offers valuable strategies for navigating the complexities of the current market.
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Cuts Won't Fix Labor Supply
- The market prices multiple Fed cuts but labor supply constraints mean cuts may not ease inflationary pressure.
- That makes the curve steeper and favors shorter-to-intermediate durations rather than long extensions.
Hold Intermediate Duration
- Stay positioned in the intermediate part of the curve (around five years) and avoid rushing into longer duration.
- Wait to extend duration until you see clearer signs that yields will sustainably move lower.
Income Drives Total Return
- High nominal yields provide a strong income cushion and raise break-even moves needed for flat returns.
- That makes income the primary driver of expected fixed income total return over multiple horizons.