A Holiday Reset

Fixed income markets ended the year with higher yields and steeper curves as investors pushed out expectations for rate cuts and demanded more compensation for duration risk, even as central banks signaled a cautious, data-dependent stance. Credit markets proved resilient in this environment, with investment grade spreads grinding tighter and high yield benefiting from strong carry, healthy fundamentals, and improving risk sentiment. Securitized assets stood out as a key bright spot, with agency MBS and select RMBS and CMBS segments offering attractive income, solid collateral quality, and favorable supply-demand dynamics.

Looking ahead to 2026, positioning centers on neutral overall duration but favors curve steepeners in major developed markets and a modest underweight to the U.S. dollar alongside selective exposure to higher-beta currencies. Emerging market debt remains a core opportunity given elevated real yields, reform momentum, and undervalued currencies, while corporate credit strategy tilts away from tight-valued IG toward carefully chosen high yield issuers. Within securitized products—where conviction is highest—agency MBS, non-agency RMBS, targeted CMBS exposures, and Danish covered bonds are expected to play an important role in delivering carry-driven returns while managing interest rate risk.