UBS On-Air: Market Moves Top of the Morning: Fixed Income Strategist - Navigating through the fog
Jul 17, 2025
Leslie Falconio, Head of Taxable Fixed Income Strategy Americas at UBS, shares expert insights on navigating the fixed income landscape for 2H25. She discusses the outlook for interest rates and the shifting dynamics between investment grade and high yield bonds, where high yield has recently outperformed. Leslie also highlights the risks posed by rising interest rates and inflation, emphasizing the importance of economic data over political speculation. Tune in for strategic positioning tips in a complex market!
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Interest Rate Outlook 2H 2025
- The interest rate outlook for the second half shows slower growth and a 10-year yield near 4.25%.
- Inflation rises could cause short-term rate spikes, but overall rates should slow as the Fed cuts in September.
Duration Positioning Strategy
- Investors should hold intermediate durations, specifically around 5 years, and wait to extend to 10 years when yields rise between 4.60% and 4.80%.
- This strategy anticipates yield spikes before declines into early 2026 with Fed cuts and positive gross flows.
Inflation Impact on Fixed Income
- So far, inflation expectations are not dampening fixed income or equity markets performance.
- Inflation impacts and tariff-driven increases may surface soon, risking rising yields and wider credit spreads.