Fixed Income

Global credit markets have entered the final quarter of 2025 in remarkably good shape. Corporate fundamentals remain robust: earnings across sectors have generally surprised to the upside, leverage is low, and balance sheets are strong, in contrast to sovereign balance sheets, where leverage remains elevated.

The global high yield asset class offers a compelling blend of income and cushion, making it an attractive allocation for investors navigating a complex landscape.

The US economy has entered unknown territory in more ways than one.

Candriam has long been recognised for its leadership in ESG, but our reputation is equally rooted in deep credit expertise — analysing not just issuers, but the entire architecture of financial markets. This perspective is particularly critical in complex areas such as bank capital, where instruments like CoCos play a decisive role.

The global rates landscape is entering a decisive new phase as the long-standing flatness of yield curves gives way to steepness that has not been seen since 2011. The term premium, the additional interest by bondholders investing in longer-dated bonds versus short-term bonds, is back after an absence of many years.

On rates markets, August and the first week of September were marked by a noticeable de-correlation on both sides of the Atlantic. While Euro rates moved sideways, Treasury yields declined significantly, especially at the short end of the curve. This shift and steepening of the curve reflects a weakening labour market, accelerating Fed rate cut expectations.

Yields remain elevated across both U.S. and European markets, offering attractive carry for investors in both Investment Grade (IG) and High Yield (HY).

June proved to be a fraught month for market participants—marked not only by record-breaking heatwaves, but also by a barrage of geopolitical and macroeconomic developments that tested investor nerves.

May and the first two weeks of June saw a good performance from risk assets, while rates assets underperformed.

You want to talk about euro swap spreads versus US swap spreads? We watch that, too. But to be honest, that graph is one of the last things we look at when managing euro fixed income aggregate portfolios. So if you want to see it, you’ll have to read all the rest of this page first.

In what can only be described as an event-packed May, financial markets navigated a minefield of global macro developments: escalating US–China trade tensions, a surge in Japanese government bond yields, and renewed concern about fiscal sustainability across developed markets.

After the hit to risky assets and even US Treasury bonds in the wake of the so-called “Liberation Day” announcement of a far higher tariff regime, some semblance of calm returned to markets.

European yields have returned to more historical norms following the years in the low-yield wilderness, while the German fiscal situation is reaching an inflection point.

April unfolded as a month of intense turbulence in financial markets, driven by a barrage of political manoeuvrings, economic uncertainty, and shifting monetary policies. Markets were rattled by elevated tariffs, escalating rhetoric, and retaliatory measures that prompted investors to reassess growth prospects, price in heightened recession risks, and retreat from riskier assets.

The bond markets in March were already abuzz with talk of tariffs, as the Trump administration implemented previously delayed tariffs on Canada, Mexico and China. .

According to the Institute for Economics & Peace, there are 56 active conflicts in the world, the greatest number since the end of World War II. Increasingly complex geopolitics and ReArm Europe are keeping investors on our toes, analytically.

Navigating fixed income markets can be a daunting task for those unfamiliar with their intricacies. A multitude of factors – fundamentals, valuations and technicals – can impact a wide range of instruments – sovereigns (developed & emerging), corporates (investment grade and high yield) –, contributing to a highly complex financial landscape.

Over the past weeks, bond markets faced significant volatility primarily due to a barrage of announcements from the White House.

Over the month of January, rates markets ended up at much the same point where they stood at the beginning of the year, but masking significant intra-month volatility. Usually, an inauguration would not be expected to cause much turbulence, as policy proposals should be well-understood and priced in.

The global macro environment will likely favour further dollar strength, despite the strong appreciation since the US elections in early November. Under President Trump’s second administration, we may even test the dollar highs seen during Paul Volcker’s Federal Reserve chairmanship in the 1980s.

The last month of 2024 was a difficult one for the markets. Most major rates markets sold off, with the US 10-year rising by 40 basis points. At the same time, risk assets offered relatively little respite.

This US presidential cycle was historic in many ways, not least in terms of the starkly contrasting policy agendas proposed by the opposing candidates.

Following the US election, what will the bond landscape look like around the world in the near term and the medium term? President-elect Trump should be able to implement much of his political agenda over the next few years. We think four themes stand out: Tariffs, Regulations, Tax Cuts, and Immigration. What we don’t yet know is the timing and the magnitude of these elements.

Over a decade ago negative rates started looming, creating an unprecedented environment. Well the Fixed Income space is definitely the opposite, a lush jungle dominated by the canopy, aka the AAA-AA ratings, covering an Investment Grade A to BBB ratings understory, down to the High Yield BB and lower ratings forest floor.

Central banks were out in full force in September, with the Federal Reserve implementing a meaningful 0.5% rate cut, while the ECB continued its easing cycle with a cut of 0.25%.