UBS On-Air: Market Moves Fixed Income Conversation Corner with Ed Al-Hussainy (Columbia Threadneedle) and Leslie Falconio (UBS CIO)
Apr 15, 2025
Leslie Falconio, Head of Taxable Fixed Income Strategy for the Americas at UBS, shares insights on fixed income amidst economic uncertainty. The discussion navigates current investment landscapes, exploring cautious credit strategies and their implications on market dynamics. They emphasize the shifting relationship between equity and fixed income markets, highlighting opportunities in U.S. high yield corporate credit. Both Falconio and Ed Al-Hussainy also stress the need for a strategic approach during volatile times, steering clear of panic-driven decisions.
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Moderation of Growth Optimism in Q1
- The first quarter showed moderation of overly optimistic growth expectations priced in at the end of last year.
- This led to treasury yield rallies and credit spread decompression as households and companies softened their outlook.
Cautious Credit Risk Adding
- Add credit risk opportunistically when credit spreads widen but remain cautious due to increased economic uncertainty.
- Reduce duration risk by taking profits on treasury trades when appropriate to balance risk exposure.
Fed Rate Cuts Delayed, Fiscal Risks Rise
- Fed is likely to delay rate cuts until late in the year due to upside inflation risks outweighing growth concerns.
- Diverging fiscal pressures globally may lead to increased deficits, complicating duration risk despite slowing growth.