Tim Leary, Senior Portfolio Manager on RBC GAM's BlueBay Leveraged Finance team, discusses the evolving dynamics between quality carry and market timing in today's environment.

• The S&P recovered to flat for the year, yet investors seem to remain split between thinking they missed the rally and expecting another drop.
• High yield tech companies show stronger balance sheets and more diverse investor interest than their private credit counterparts, despite concerns around AI and private debt.
• Nearly 90% of the US high yield market carries BB or B ratings, offering potentially consistent income as private credit markets face redemption pressures.

Andrzej Skiba, Head of U.S. Fixed Income on RBC GAM's BlueBay U.S. Fixed Income team, breaks down how geopolitical events are shaping bond strategies and why regional economic exposures differ significantly.

• Markets have recovered on hopes for diplomatic progress, though uncertainty around Iran negotiations remains given strategic considerations over key shipping routes.
• So far, U.S. economic exposure appears more limited due to energy independence, while Europe and Asia may face heightened recession risks from energy price pressures.
• Investment approach emphasizes high-quality U.S. bonds over riskier options, with selective credit criteria and protective strategies to manage current market conditions.

Jeff Jablons, Senior High Yield Analyst covering telecom, cable, satellite, and technology sectors on RBC GAM's BlueBay U.S. Fixed Income team, examines how a video game company’s take-private deal shatters conventional leveraged buyout dynamics.

• The capital structure flips convention with $36 billion in equity versus just $18 billion in debt, reversing the typical 60-75% debt ratio seen in traditional LBOs.
• Saudi Arabia's Public Investment Fund anchors this unprecedented deal with a $30+ billion equity commitment, demonstrating the power of sovereign-scale capital backing.
• Strong investor demand across US and European debt markets suggests continued appetite for large, complex deals despite Q1 volatility.

Eric Hathaway, Portfolio Manager on the BlueBay U.S. Fixed Income team, explores three catalysts that could revive rate cut expectations despite current hawkish sentiment.

1. Labor market weakness deepens beneath surface as February nonfarm payrolls fell 92,000 jobs with December revised from +48,000 to -17,000, suggesting unemployment could drift higher and force Fed reconsideration.
2. AI-driven displacement moves from theory to reality as major institutions plan significant workforce reductions, with economists estimating 5-10,000 monthly job losses in exposed sectors could expand into broader white-collar slowdown.
3. Private credit stress could tighten financial conditions independently as defensive lenders, wider spreads, and clogged refinancing channels may prompt Fed action before full recession materializes.

The path forward becomes clearer when growth concerns override inflation fears.

Anne Greenwood, Institutional Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, analyzes how AI-driven repricing may redirect capital flows across credit markets.

1. Widespread credit repricing pushes spreads to widest levels since last year, driven primarily by software sector concerns, while energy tightens on geopolitical supply pressures.
2. Direct lending holds over 30% software exposure compared to less than 4% in high yield, concentrating AI displacement risk where liquidity is most constrained and underwriting scrutiny intensifying.
3. Investors pausing private credit allocations may find natural alternatives in today's higher-quality, more liquid high yield market with minimal software sector overlap.

Neil Sun, Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, examines how stagflation-style stress and cross-asset volatility are reshaping the credit landscape and potentially creating selective opportunities.

1. Private credit deterioration is accelerating as BDCs report rising nonaccruals and questionable loan valuations while higher rates expose overleveraged structures in this illiquid corner of the market.
2. AI infrastructure spending creates a credit divide where mega-cap tech maintains robust capital access for data centers and long-term investments while software and leveraged borrowers face intensified scrutiny on business model durability.
3. Strong IG primary demand and open funding markets contrast sharply with rising dispersion in financials and insurance sectors, presenting entry points in defensive high-quality bonds as heavy supply and macro volatility reset spreads wider.

Peter Keenan, Senior Credit Trader on RBC GAM's BlueBay U.S. Fixed Income team, examines how cash flows and positioning created an unexpected buffer against Middle East tensions.

1. High yield bonds showed resilience despite heightened Middle East tensions and surging oil prices on supply concerns from potential Strait of Hormuz disruptions.
2. Conservative positioning and substantial incoming cash from coupons, calls, and maturities created buying pressure in a market where geopolitical uncertainty sidelined new corporate issuance.
3. Treasury markets repriced sharply as investors unwound long positions, recalibrating expectations for Fed policy amid concerns about persistent inflation from rising energy costs.

1. January CPI rose just 0.2% monthly and 2.4% annually, below consensus, keeping two 2026 rate cuts priced in.
2. Technology sector's elevated 2026 capex projections are generating significant new supply in investment grade credit markets, creating technical spread pressure while high yield remains well positioned.
3. The AI investment cycle presents dual risks—whether monetization will justify near-term spending and whether competition for resources could generate inflationary pressure before productivity gains materialize.

Laurie Mount, Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, breaks down how FOMC leadership changes and political headwinds are shaping the Fed's uncertain 2026 policy path.

1. Rates held at 3.50–3.75% as four hawkish members joined, though dissents from Governors Miran and Waller favored easing.
2. Warsh's Fed chair nomination faces Senate opposition pending a DOJ investigation into Powell.
3. Money market balances near $8 trillion as investors appear to favor short-duration positions.

Anne Greenwood, Institutional Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, discusses the Fed's steady approach and how heavy corporate issuance is shaping the credit landscape.

1. The Fed is expected to hold rates this week, with the potential for up to 3 cuts later in 2026.
2. Corporate fundamentals remain solid, though shorter-dated bonds may offer advantages as front-end rates potentially decline.
3. Heavy corporate borrowing for AI spending, tech earnings results, and geopolitical tensions could impact spreads and bring volatility in Q1.

John Guarnera, Senior Corporate Analyst on RBC GAM's BlueBay U.S. Fixed Income team, analyzes the latest bank results and their implications for both economic fundamentals and sector positioning.

1. Investment banking surged—M&A advisory revenues climbed over 40% in some banks—while equity trading gains point to optimism in capital markets.
2. Asset quality remains stable across lending verticals, dispelling concerns around fraud events seen earlier in the year.
3. Loan growth in commercial sectors and steady deposits reinforce banks' sector momentum and ability to navigate credit and regulatory changes.

Tim Leary, Senior Portfolio Manager on RBC GAM’s BlueBay U.S. Fixed Income team, shares insights on high-yield market dynamics and potential credit risks in the year ahead.

1. Spreads across high-yield markets remain tight, supported by strong investor interest and steady issuance.
2. High-yield bond issuance can align with positive returns, underscoring resilience in market performance.
3. Trump’s proposal to cap credit card fees at 10% could hurt borrowers, with subprime consumers likely facing reduced access to credit.

In the latest edition of The Weekly Fix, Andrzej Skiba, BlueBay Head of U.S. Fixed Income at RBC GAM, explores a strong fixed income outlook for the new year, driven by carry income and economic momentum. However, the year also brings critical questions about monetary policy, the AI-driven capital wave, and heavy credit issuance.

1. High single-digit returns may be achievable, supported by carry income and projected economic growth.
2. Inflation remains above target, and potential rate cuts could hinge on changes at the Fed.
3. Credit markets may contend with heavy issuance, posing questions about demand and spread levels.

In this week’s episode, Laurie Mount, Portfolio Manager with RBC’s BlueBay U.S. Fixed Income team, highlights key trends shaping cash management strategies:

• The Fed lowered the fed funds rate by 25 basis points to 3.50–3.75%, with varied perspectives on the pace of rate adjustments.
• Money market assets surpassed $8 trillion, fueled by elevated short-term rates and cautious investor sentiment.
• Looking ahead, 2026 may bring key labor market developments critical to inflation, growth, and further potential Fed cuts.

Anne Greenwood, Institutional Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, explores the outlook for U.S. fixed income markets in 2026, focusing on Federal Reserve policy, the credit cycle, and the impact of surging AI-driven debt issuance.

• We expect a hawkish rate cut to close 2025, signaling a dovish path ahead, with more cuts expected in 2026 as U.S. growth reaccelerates.
• Despite tight spreads, stronger credit quality and rising volatility create opportunities for idiosyncratic spread compression trades.
• Record AI-related debt issuance may lead to short-term dislocations, but diversified funding channels and sustainable growth in AI point to resilience.

• The 43-day government shutdown delayed critical economic data releases, distorting analysis and increasing market volatility as investors navigate incomplete information.
• U.S. Treasury yields experienced sharp movements, closing above 4.05%, as markets priced in a potential Federal Reserve rate cut in December.
• Investor tensions remain elevated amid rate-cut speculation, stock-market instability, and persistent macroeconomic ambiguity, driving interest in fixed-income securities.

Tim Leary, Senior Portfolio Manager on RBC GAM’s BlueBay U.S. Fixed Income team, explains how US High Yield (HY) bonds have continued to stand out as a reliable option for generating income while managing rate risk during periods of market uncertainty.

• The US HY index currently provides an Option Adjusted Spread (OAS) of 307 bps with a duration of just over 3 years, widening 14 bps this year despite a 7% return.
• Compared to US Investment Grade (IG) corporates, which yield 83 bps with a 6.4-year duration, HY bonds have offered higher income potential with notably lower interest rate exposure.
• With economic data releases expected to drive rate volatility, well-rated HY bonds have continued to deliver steady interest income for investors managing through changing conditions.

Neil Sun, Portfolio Manager on the BlueBay U.S. Fixed Income team, discusses a tectonic shift in Silicon Valley’s funding strategy. Once cash-rich with pristine balance sheets, major tech companies are now tapping the investment-grade bond market to finance their soaring AI-related capital expenditures.

• Silicon Valley's debt strategy shift, including $75bn in recent issuances, shows tech giants are prioritizing debt over equity due to tight spreads and tax advantages.
• Multi-tranche deals across maturities, from 5 to 50 years, are catering to robust demand from insurance and pension funds seeking durable and high-rated bonds.
• For investors, the short-term market impact may feel bumpy with wider spreads, but this creates valuable opportunities to grab highly rated mega-cap bonds at more attractive valuations.

Laurie Mount, Portfolio Manager with RBC GAM’s BlueBay US Fixed Income team, highlights the Federal Reserve's recent rate cut and its impact on cash strategies amid ongoing economic uncertainties.

• The Fed lowered the fed funds rate by 25 basis points to 3.75–4.00%, while signaling caution regarding December cuts due to labor market risks and committee divisions over inflation concerns.
• Fed Chair Powell warned against assuming another rate cut soon, citing a lack of data due to the government shutdown, which has already led markets to cut December rate cut predictions significantly.
• In response, our team is prioritizing floating-rate securities and short-term fixed-rate assets under one year, vigilantly analyzing Fed communications and economic data to adapt to evolving conditions.

Anne Greenwood, Institutional Portfolio Manager on RBC BlueBay’s US Fixed Income team, discusses the current market landscape and opportunities for active managers.

• Equities at record highs and tight credit spreads indicate market resilience, despite recent jitters.
• Lower-quality high-yield bonds and leverage loans require caution due to deteriorating credit metrics and increased default rates.
• Active managers may be able to capitalize on volatility by providing liquidity and generating strong risk-adjusted returns in fundamentally stable companies.

John Guarnera, Senior Corporate Analyst on RBC BlueBay’s US Fixed Income Team, explores the latest data from US banks and an outlook on recent credit market developments.

• Third-quarter earnings from major US banks revealed stable asset quality and improved credit metrics.
• Banks' balance sheets remain robust, with high capital levels and strong liquidity, supporting their ability to manage potential risks.
• Consumer and commercial credit trends show improvement, with delinquency metrics stabilizing across prime and subprime markets.

In this edition of #TheWeeklyFix, Charlie Whinery, Portfolio Manager on RBC BlueBay’s US Fixed Income Team, breaks down Q3's strong performance and how his team is navigating current market dynamics.

• US HY delivered solid 2.4% returns in Q3 with robust $140B issuance, low leverage levels, and healthy interest coverage ratios well above historical norms.
• Geopolitical risks create uncertainty - Trump's tariff threats on Chinese goods sparked volatility, making front-end positioning a potential strategic advantage.

value in key sectors.

Andrzej Skiba, Head of BlueBay U.S. Fixed Income at RBC GAM, shares how his team is navigating today’s market dynamics while seeking to position for strong returns in 2026.

• Favoring curve steepeners for U.S. interest rate exposure, with resilience expected unless inflation drops significantly or fiscal deficits shrink unexpectedly.
• Generic corporate credit spreads remain unappealing, prompting a focus on idiosyncratic opportunities in sectors like California utilities, chip manufacturing, and US housing.
• We anticipate high single-digit returns in investment grade and high yield fixed income, supported by multiple rate cuts and U.S. growth above 2%.

Mindy Gudmundson, Institutional Portfolio Manager with RBC BlueBay’s US Fixed Income team, breaks down the latest economic data and key developments shaping markets.

• Second-quarter GDP revised to 3.8%, driven by strong consumer spending, while jobless claims fell, easing labor market concerns.
• This week’s labor market data will be critical in shaping expectations for Federal Reserve rate cuts.
• A potential government shutdown could delay key economic data releases but is unlikely to significantly impact the broader economy.

Laurie Mount, Portfolio Manager with RBC BlueBay’s U.S. Fixed Income team, unpacks the Federal Reserve’s latest rate cut, economic projections, and what it all means for investors.

• The Fed cut rates by 25 basis points, lowering the target range to 4.00–4.25%, with projections showing stronger growth, higher inflation, and lower unemployment through 2026–27.
• Diverging views among FOMC members reveal uncertainty, with projections ranging from no more cuts to a 100-basis point reduction by year-end 2025.
• Chair Powell described the cut as a risk management move, emphasizing a data-dependent approach amid shifting risks to labor markets and inflation.

Teri Savage, Senior Mortgage Trader with RBC BlueBay’s Fixed Income team, explores the pressures on the U.S. housing market and the potential impact of upcoming policy changes.

• Home prices continue to outpace income growth, while 30-year mortgage rates remain stubbornly above 6%, pushing affordability to record lows.
• The Federal Reserve is expected to cut the Fed funds rate, which could drive down Treasury yields and, in turn, lower mortgage rates to help ease affordability pressures.
• Mortgage investors should remain flexible and closely monitor policy developments, as the administration prioritizes lowering rates to address housing market challenges.

Understand how these dynamics could shape the housing market and investment strategies.

• Weaker job data and key events like Jackson Hole and August payrolls pave the way for a September rate cut.
• Strong technicals in the US bond markets persist, with significant issuance and demand driving tighter spreads, lower yields, and favorable pricing.
• The S&P showed minor volatility, while the Russell 2000 demonstrated stronger risk sentiment, reflecting optimism in HY markets due to overlapping names.
• This leads us to prefer fixed coupons over variable in fixed income credit markets.

Neil Sun, Portfolio Manager on the BlueBay U.S. Fixed Income team, analyzes the tightest corporate bond spreads in decades and highlights potential opportunities.

• Investment-grade corporate bond spreads are near 80 bps over Treasuries, driven by strong demand despite slim risk compensation.
• With $130-150bn in new corporate issuance expected, the market’s ability to absorb supply without widening spreads will be tested.
• Long-term conditions support a bullish credit stance, but near-term widening may create selective re-entry opportunities for investors.

Anne Greenwood, Institutional Portfolio Manager with RBC BlueBay’s Fixed Income team, breaks down the market reaction to the Jackson Hole Symposium.

• Fed Chair Jerome Powell signaled the potential for a September rate cut, citing balanced labor markets and easing inflation risks.
• U.S. risk assets remain well supported, but heightened uncertainty and a wide range of outcomes suggest volatility is likely to persist.
• It is important to maintain a cautious approach to credit risk and liquidity as markets prepare for seasonal shifts in debt supply.

Mindy Gudmundson, Institutional Portfolio Manager with RBC BlueBay’s U.S. Fixed Income team, breaks down the latest inflation data, rate cut expectations, and what to watch ahead of Chair Powell’s Jackson Hole speech.

• Headline inflation dipped to 2.7%, nearing the Fed’s target, but core CPI rose to 3.1%, keeping inflation risks in focus.
• Markets expect a 25 bps cut in September, with more cuts likely in the months ahead.
• Chair Powell’s speech in Jackson Hole is expected to provide clarity on the timeline and scope of policy easing.

• Inflation Data Overview: July's Consumer Price Index (CPI) rose 0.2% month-over-month (headline) and 0.3% excluding food and energy, with year-over-year increases of 2.7% (headline) and 3.1% (core), aligning with expectations.
• Market and Fed Expectations: Markets now price a 96% chance of a 25 bps rate cut in September, up from 86% pre-CPI release. The Jackson Hole Symposium (Aug 21-23) is expected to signal further monetary easing, consistent with the Fed's potential 1-2 rate cuts this year.
• Economic Outlook: Despite a slowing pace of activity below 2% in late 2025, deregulation and policy easing may support economic growth into 2026. Corporate earnings have remained resilient, countering concerns of deeper economic trouble.

• The July jobs report fell significantly below expectations, with only 73,000 jobs added versus the forecasted 104,000, while the unemployment rate rose to 4.2%, signaling a potential softening in the labor market.
• Treasuries rallied sharply, and markets have now fully priced in two Federal Reserve rate cuts by year-end, reflecting growing expectations for monetary easing.
• The FOMC's recent decision to hold rates steady saw rare dissent from two Governors, highlighting internal debate over balancing risks to growth and inflation amid ongoing tariff and labor market concerns.
• The Federal Reserve's data-driven approach will focus on upcoming CPI releases and jobs reports, with portfolio strategies being adjusted to prepare for potential lower interest rate environment.

Neil Sun, Portfolio Manager on the BlueBay U.S. Fixed Income team, discusses how portfolio managers are hedging their credit exposure despite a compelling market environment.

• Yields remain attractive, inflows are strong, and performance is solid—even with tight credit spreads.
• Managers are staying cautious, holding high-conviction positions while using hedging strategies like credit default swaps and options to protect against downside risks.
• In today’s market, managing risk is just as important as finding yield. Strategic hedging ensures portfolios stay resilient, no matter what comes next.

Staying invested doesn’t mean flying blind. Active risk management is key in tighter markets.

Andrzej Skiba, BlueBay Head of U.S. Fixed Income, gives an update on monetary policy trends and their effects on the market:

• The Fed is unlikely to cut rates in July but may deliver 1-2 cuts by year-end, depending on trade developments and inflation trends.
• Treasury markets reflect expectations of more aggressive rate cuts under future Fed leadership, supporting a preference for U.S. curve “steepeners.”
• Strong technicals are driving credit market activity as investors lock in yields amid limited new issuance. Active management remains essential to uncovering value in tighter spreads.

As markets navigate shifting policy expectations and credit opportunities, staying agile is more important than ever.

Tim Leary, Senior Portfolio Manager on the BlueBay US Fixed Income team, dives into the macro and trade themes driving markets as the summer lull in new issuance takes hold.

• Markets are eyeing the August 1st deadline for potential 30% tariffs on Europe, with optimism that a resolution will be reached.
• US GSIBs and regional banks kick off 2Q earnings this week, with a focus on asset quality, macro outlooks, and shareholder distribution plans.
• US High Yield bond market liquidity is at record highs, with daily trading volumes up 14–19% year-over-year, signaling a more tradeable and robust market.

With strong technicals, tighter credit spreads, and optimism around 2Q numbers, the market is navigating the balance between opportunity and risk.

From reallocating to sectors like insurance and utilities to exploring subordinated debt and non-agency MBS, Andrzej explains how we’re staying constructive while moderating risk. With volatility likely to rise later this summer, strategic credit hedges and tactical reallocations are keeping portfolios nimble and ready for what’s next.

Tim Leary, Senior Portfolio Manager on the BlueBay U.S. Fixed Income team, highlights the resilience of the U.S. consumer, with cash balances at a record $21.7 trillion and credit card utilization rates back to normal.

As High Yield bonds outperform and spreads tighten, the strength of the American consumer could drive inflows into credit markets, offering opportunities for investors looking beyond equities at all-time highs.

• $5.3B in YTD inflows, led by fast-moving ETF money
• Limited new issuance – currently -18% vs. last year
• Elevated cash balances and muted dealer inventories

If geopolitical risks ease and issuance remains slow, spreads could have room to tighten from here.

Laurie Mount, Portfolio Manager on the BlueBay US Fixed Income team, breaks down the latest on debt ceiling negotiations and explains how the shrinking supply of Treasury bills is creating distortions in the bill curve, noting yields on some maturities topping 4.3%.

With record cash in money market funds and the Fed expected to stay patient, Laurie shares how she’s managing risk while staying liquid and flexible in an evolving rate environment.

Neil Sun, Portfolio Manager on the BlueBay U.S. Fixed Income team, explains why Investment Grade credit is attracting yield-hungry investors despite spreads returning to their tighter range. He also highlights where sector dispersion is creating value and why active, selective positioning is essential in today’s market.

It’s a bond buyer’s market, if you know where to look.

Eric Hathaway, Senior Portfolio Manager on the BlueBay U.S. Fixed Income team, unpacks the latest housing data, including the first national home price decline in over two years, and shares what it means for market participants.

Despite affordability challenges and slower sales, mortgage-backed securities remain resilient, backed by healthy consumer balance sheets and historically low loan losses.

With technicals strong and institutional demand holding steady, the bigger story may be how yield curve dynamics evolve amid ongoing policy uncertainty.

• A new U.S.-UK trade deal (with more to come)
• A 90-day tariff pause with China
• The Fed’s “wait-and-see” approach amid rising inflation and employment risks

With April CPI and retail data on deck, markets are watching closely.

In today’s episode of The Weekly Fix, Neil Sun, Portfolio Manager on the BlueBay US Fixed Income team, unpacks the Treasury basis trade and how it works, why it’s grown to a $600B+ behemoth, and what could go wrong. In a market built on leverage, even small cracks can cause big waves.

Neil explains why regulators are watching closely, and what investors should monitor going forward.

With earnings season in full swing and Treasury yields swinging, Peter shares why patience and a sharp eye for quality remain key for credit investors right now.

President Trump’s aggressive trade measures are shaking global markets, driving volatility in commodities, pressuring corporate margins, and prompting boardrooms to reassess guidance. But amid the noise, Tim highlights a resilient U.S. economy and a liquid, high-quality high yield market that’s presenting new opportunities for investors willing to adapt. The playbook from 2024 won’t work in 2025. It’s time for a new approach

Mindy Gudmundson, Institutional Portfolio Manager on the BlueBay U.S. Fixed Income team, breaks down the economic uncertainty created by the Trump administration’s tariff threats—and what it means for markets, consumer behavior, and Fed policy.

Eric Hathaway, Portfolio Manager on the BlueBay U.S. Fixed Income team, explains why ABS remains a defensive favorite, offering built-in structural protections, shorter duration, and yields that compete with riskier assets

Lower Credit Quality Securities. CLO portfolios and interest could be deemed by rating agencies to have substantial vulnerability to default in payment of interest and/or principal. Other securities could have the lowest quality ratings or be unrated, have been downgraded or have been placed on “credit watch” for future downgrades. Lower rated and unrated securities can have large uncertainties or major risk exposures to adverse conditions and can be considered to be speculative. Generally, such securities offer a higher return potential than higher rated securities but involve greater volatility of price and greater risk of loss of income and principal. The market values of portfolios or interests in CLOs also tend to be more sensitive to changes in market or economic conditions than other securities. The value of the leveraged loans underlying a CLO can also be affected by changes in the market’s perception of the entity issuing or guaranteeing them, or by changes in government regulations and tax policies.

Leverage Risk. Leverage can result from certain transactions, borrowing and reverse repurchase agreements and derivatives. Leverage can exaggerate the effect of a change in the value of the portfolio’s securities, causing the portfolio to be more volatile than if leverage was not used. Losses incurred on leveraged investments will increase in direct proportion to the degree of leverage employed. CLO portfolios and investors also incur interest expense on borrowings used to leverage its positions. The use of leverage also can result in the forced liquidation of positions (which could otherwise have been profitable) as a result of margin or collateral calls. For CLO portfolios and investors, to the extent the Adviser can adjust leverage levels, the Adviser could increase (or decrease) leverage at times when it is not advantageous to do so and, as a result, the value of certain securities issued by the CLO could decrease.

• Current projections are for one rate cut expected this year and four in 2025.
• Before rate cuts commence, incoming data needs to further validate recent easing of inflationary pressures.
• Looking at the fixed income universe, we continue to like the front-end of the Treasury curve.

Manager on the BlueBay U.S. Fixed Income team, discusses how risk assets and

rates were bolstered by the latest release of inflation data.

Key points:

• Broadly speaking, the underlying technicals are very positive for corporate credit.
• Idiosyncratic risk in a few areas of the market have generated volatility.
• We experienced a higher default rate in March, but our view is that defaults will remain benign this year & trend upward next year. 

• The past months have certainly been a sustained busy period for the new issue market.
• Strong investor demand has helped drive credit spreads tighter.
• Chairman Powell was decidedly dovish at the FOMC last week… driving yields lower.
• The economic calendar is full this week and investors markets are bracing for the latest inflation measures.

• CPI came in hotter than market participants hoped and this drove yields higher across the US Treasury curve.
• The shape of the yield curve indicates that markets expect an economic slowdown, which is not our imminent base-case.
• Economic data in the US is doing little to show signs of slowing.
• We continue to expect that rate cuts will likely be later and potentially fewer than others may be pricing in.

• Strong growth, labor markets and inflation running hot are not a combination desired by the Fed.
• In terms of jobs, growth remained robust, but we’ve added fewer jobs than expected.
• Inflation remains sticky, with February readings staying higher, following up January’s strong data.
• We do expect a slowdown to manifest itself and that should help inflation to moderate.

Key points:

• Spreads may be tighter, but yields are higher on the year.
• This may peak investor interest and we have seen high fund flows.
• This is likely a function of the market coming back towards the Fed’s path.

• It’s a busy week on the economic calendar.
• Signs that the economy is doing better than expected may push rate cuts out further in the future.
• We’re paying special attention to the release of the Producer Consumption Expenditures (PCE) price index to gauge lingering inflation.

• In our judgement, US commercial real estate (CRE) will be a source of negative headlines in 2024.
• Several banks across the globe with significant US CRE exposure have reported increased provisioning.
• Larger banks (>$150B in assets) have been quick to address the deterioration with collateral revaluations and establishing loss reserves where appropriate.
• Periods of dislocation are ripe with opportunities, however careful credit selection is of paramount importance.

• The US economy continues to turn out strong results.
• It remains to be seen if softer data paves the way for rate cuts later in the year.
• The market continues to adjust its view on the timing and extent of rate cuts.

• Bond issuance is on a record setting pace in January.
• Compelling total return opportunities exist in fixed income.
• Although the market was early to rally as hard as it did in the end of 2023, the directionality of the rally is the correct one. 
• We look to the Fed meeting this week to provide market insight.

healthy following the retrenchment.

• Bond markets have given back the sharp gains achieved at the end of 2023.
• Technicals are quite strong and the market remains liquid and healthy.
• On the floating rate side of the coin, leveraged loan activity is robust.

Summary points:

• The sharp market rally has investors rethinking future return expectations. Significant rate cuts are priced in.
• When assessing market projections for early rate cuts, we see room for disappointment.
• On average, Investment Grade, High Yield and MBS spreads look uninspiring.
• We see plenty of opportunities to generate alpha in attractively-priced opportunities and dislocated idiosyncratic credit stories. 

Summary points:

• The year began against a backdrop of a resilient US economy but one saddled with high inflation.
• 2023 has included volatility from monetary policy, fiscal policy, domestic politics, geopolitics, and company specific events.
• Markets have rallied into the end of the year, supported by dovish Fed language and the increased chances of a soft economic landing.
• We believe that going into 2024 there is plenty of potential for volatility to re-emerge, but our base-case is for gradually falling inflation and rate cuts. 

This will be a busy week in the market as investors look

to digest key data readings on key measures. 

BlueBay Institutional Portfolio Manager Stephen Fitzsimmons outlines the

significance of the news and our expectations.

Key points:

·        

Upcoming data releases will provide further

clarity to investors.

·        

We’ll see information on small business

optimism, retail sales, industrial production. 

News on inflation and the Fed rate decision will be particularly

insightful.

·        

We

think that the market’s enthusiasm for rate cuts next year is over-blown,

leaving room for disappointment.

Key points-

• High current coupons and levels of carry on high quality corporate debt are enticing to investors. 
• Recent positive developments on the US macroeconomic front are driving demand.  
• The market is also supported by the expectation of rate cuts next year, but there are risks to that projection.

The key is to remain focused on the bigger picture.

Key points:

• We’ve entered a quiet time on the market calendar.
• There’s little new issuance or refinancing going on.
• We’re focused on the bigger picture of disinflation, healthy fundamentals and strong technicals.
• We are happy to let elevated interest income do its job.

• Inflation data was announced as having been below expectations across the board.
• Meanwhile, retail sales showed material signs of cooling. 
• Interest rates and stocks rallied hard.

·        

There are significant reasons why we believe

bullishness in fixed income is still warranted.

• It’s time to give public large, liquid, publicly traded corporate bonds a closer look in this low default environment.
• Yields are up, inflation has retreated, and the Fed is nearly done raising rates.
• You haven’t missed your opportunity to profit from the current environment.

• Concerns about over supply and peak rates have receded. 
• We would argue that risks are balanced.
• While the Fed may decide to raise rates again in December, we do see evidence of a slowdown.

Income, discusses the potential impact of the FOMC meeting on fixed income

assets, emphasizing the attractive carry return, and suggesting that investors

with a medium-term horizon should capitalize on the opportunity. Skiba also expresses

skepticism about the Fed's optimistic scenario.