UBS On-Air: Market Moves Top of the Morning: Fixed Income Strategist - Reaching for yield
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Nov 17, 2025 Leslie Falconio and Letty Zemaitis from UBS provide deep insights into the fixed income market. They discuss the unexpected resilience of high-quality bonds amidst 2025’s volatility. The duo analyzes what factors have driven high yield outperformance, emphasizing strong fundamentals and a favorable issuance mix. Leslie also shares CIO's strategic recommendations, advocating for a focus on high-quality securitized products and a smart laddering approach for investors. Their expert perspectives offer valuable guidance for navigating today’s fixed income landscape.
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Q4 Volatility And Quality Preference
- Volatility is likely to rise in Q4 due to the government shutdown reopening and mixed data.
- Leslie Falconio says higher-quality bonds and carry should be preferred amid expected volatility.
Returns Driven By Income Not Spread Compression
- Fixed income returns in 2025 were driven mainly by lower Treasury yields and income compounding.
- Leslie Falconio notes credit spreads were roughly unchanged year-to-date, so income, not spread compression, led returns.
Why High Yield Performed Well
- High yield's 2025 outperformance reflects lower rates, anticipated Fed cuts, stronger issuer fundamentals, and robust issuance.
- Letty Zemaitis highlights that the index now has a heavier BB weighting and very low defaults supporting performance.