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Wishing everyone a Happy New Year 2026. May your trades be smooth, your risk well-managed, and your P&L hit new highs in the year ahead.

Global fixed income delivered solid positive returns in 2025, driven by high starting yields, moderate disinflation and a late-year shift toward easier central bank policy. 10Y UST finished the year a touch lower in yield despite persistent fiscal concerns, as the Fed cut rates by a cumulative75bp in the second half in response to a softer labor market and fading inflation momentum. Curves steepened across major markets as front-end yields followed policy rates lower while term premia and heavy supply kept pressure on the long end. Global credit returned about10.3% in USD terms, with US IG and HY outperforming European peers thanks to higher all-in yields, resilient earnings and still-benign default dynamics despite a gradual uptick in distress. Spreads in IG compressed to well through long-run averages, while HY remained supported by low near-term refinancing walls and strong demand for carry. EM debt generated strong double-digit returns helped by tighter spreads and a weaker dollar, though performance remained highly dispersed across idiosyncratic stories and political risk regimes. Securitized credit saw robust issuance in ABS and CLOs, with CLO remaining a key funding channel for leveraged loans even as arbitrage conditions periodically tightened; structures with stronger documentation and senior tranches outperformed. Agency MBS traded with relatively tight spreads versus sovereigns as volatility moderated, but rich valuations and negative convexity continued to cap beta appeal for more rate-sensitive allocators. Overall, 2025 validated the “income is back” narrative, with coupons rather than large duration rallies doing most of the heavy lifting for total returns.​

Looking into 2026, the macro backdrop points to a carry-dominated but more nuanced environment, with growth cooling, inflation still above target and policy normalization progressing only gradually. The base case is for additional but limited rate cuts from major central banks as weaker labor data and slowing activity offset concerns about sticky services inflation. Yield curves are likely to remain steep, as front-end yields fall with policy while intermediate and long maturities stay anchored by supply, term premium rebuilding and uncertainty around fiscal trajectories. In this setting, intermediate maturities around5-7Y look attractive from a carry-roll-down perspective, especially in high-quality sovereigns and agency sectors. IG credit enters the year with tight spreads and limited room for further compression, so security selection and sector rotation should matter more than beta; preference is generally for higher-quality balance sheets and subordinated financials over lower-rated cyclicals. HY and bank loans still offer compelling carry, but forward returns will increasingly depend on active management of downgrade and default risk as higher-for-longer real yields filter through to fundamentals. EM hard-currency credit retains a constructive medium-term story, but wider dispersion and rising geopolitical and trade tensions argue for a more selective, benchmark-agnostic approach. Securitized markets, particularly senior tranches in CLO and high-quality ABS, may continue to provide attractive spread per unit of duration versus vanilla corporates, while agency MBS can play a larger role if volatility cheapens the basis. Overall, 2026 is set up as a year where carry, curve positioning and idiosyncratic alpha drive outcomes more than big directional rate calls, with a bias toward high-quality income, intermediate duration and disciplined liquidity management in the face of episodic volatility.