Fixed-Income Outlook: Four Ways to Capitalize on Dispersion

Bond markets are offering higher yields for taking on risk than we've seen in years. This increased dispersion across countries, sectors, and issuers is creating more opportunities for active managers.

Long-term government yields are at multi-decade highs globally, driven by growth, debt, and AI-related capital demand, not just inflation. Policy divergence is key: emerging markets cut rates while developed nations, like the US and Europe, are tightening. Credit markets also show divergence, with AI investment supporting some companies while higher financing costs pressure weaker borrowers.

The core advice is to stay invested. Current yields present an attractive entry point for cash-heavy investors. Active strategies focusing on duration, credit selection, and liquidity can help navigate this complex environment and capture alpha.