Fixed Income

The March employment report showed strong job growth, but the labor market remains in a fragile state and the demand shock from tariffs could be the catalyst that tips it over the edge into recession. 

With economic headwinds building and fiscal dynamics shifting, bond markets are at a turning point. Our latest note outlines why German bund yields are set to decline and why UK gilts are poised to outperform — and how to position accordingly.

This morning’s weak consumer spending and strong inflation data reinforce our sense that the US economy is heading toward recession.

In this Second Quarter Strategy Outlook, we explore the major trends that are set to drive financial markets for the rest of 2025 and beyond.

There is an ongoing regime shift in Indonesia: SOEs will be used to drive economic growth. Bank loans will accelerate, but their profit margins will shrink. Despite higher nominal growth, Indonesian equity prices in US dollar terms will not see a sustainable bull market. Downside risks to currency and upside risks to domestic bond yields have also increased.

An analysis of historical data shows that Ba-rated bonds outperform other corporate credit tiers in the long-run on a risk-adjusted basis. That said, today’s fragile macro environment warrants a more cautious allocation. 

Households’ healthy balance sheets do not square with the rise in credit cards and auto loans delinquencies. The tailwinds that have supported higher-income cohorts’ spending have faded, presaging broad-based deterioration in credit performance.