Rhythmic Reasoning_Highlights_SWM_EN - Flipbook - Page 15
FIXED INCOME
Global central banks to proceed cautiously with further monetary easing as
sluggish economic growth faces uncertain inflation trajectory
Global Central Banks to remain accommodative in 2026
(market implied pricing to June 2026)
Global central banks will likely be more accommodative into early 2026 as GDP
growth remains sluggish, but should the global economy rebound or inflation starts to
re-accelerate higher, the easing cycle will be short-lived as central banks try to
balance employment versus price mandates. For portfolio positioning, the short- to
medium-part of the sovereign yield curve continues to be our preference.
5.0%
Fiscal concerns remain front and centre, and many countries face elections/midterms in 2026 (U.S., Chile, Colombia, Peru, Brazil, and France). The U.S. mid-terms will
be in focus with an update on tariff receipts and fiscal outlays/support to have
implications on U.S. yields while in Mexico, investors remain skeptical of the
government's fiscal projections in its 2026 Economic Package – and rating agencies
remain on watch.
Investment grade and high yield credit are pricing in robust economic growth,
accommodative monetary policy and stable credit metrics as corporate profits have
been resilient in the face of tariffs. Strong demand for yield garnered by credit may
temper should government yields move lower, and value investors rotate out of the
asset class as total return gains slow. This underscores our preference for investment
grade over high yield.
Monetary policy rates
With global trade policy uncertainty somewhat moderating, monetary policy clarity
has given a boost to fixed income. The FOMC re-joined the group of global central
banks easing monetary policy with a cut in mid-September, with markets expecting
further easing into 2026 amid a slowing employment backdrop.
4.0%
3.0%
2.0%
1.0%
0.0%
Fed
BoC
Current
ECB
BoE
BoJ
Expected policy rate in 2Q26
RBA
