Capital IdeasTM
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Fixed Income
Damien McCann
David Bradin
While uncertainty remains high, the current macroeconomic environment has created a supportive backdrop for multi-sector credit, with yields likely to remain elevated as inflation lingers above central bank targets. Looking further out, our data suggest we should continue to expect positive growth and slowly falling inflation.
In bond world, rate and spread volatility could be elevated in 2025, as markets price in shifting expectations around economic growth, political instability and central bank action.
Spreads appear tight, but investors in multi-sector income strategies may capture value by shifting allocations strategically across a diversified mix of sectors.
Compressed spreads highlight importance of security selection
High-yield corporates vs. investment-grade corporates option-adjusted spread differential
Source: Bloomberg. Data as of 31 December 2024. Chart shows the difference in option-adjusted spreads (OAS) for the Bloomberg US Corporate Investment Grade Index and Bloomberg US Corporate High Yield – 2% Issuer Capped Index.
The paper looks at five factors likely to support multi-sector portfolios in 2025.
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