The Federal Reserve’s (Fed) widely anticipated 25bp cut in mid-September was well signposted, but the detail skewed hawkish. The dots were narrowly split around two more cuts into year-end, and the Fed signalled no cuts for next year – a stance at odds with market hopes for a longer easing cycle. We’ve seen the US curve start to steepen a little, and we expect further steepening as markets price fewer cuts and growth proves more resilient.
Recent data have leaned constructive: retail sales and jobless claims surprised on the firmer side, equities keep pushing to new highs, and AI-linked momentum continues to buoy sentiment. Liquidity is ample across public and private markets, reinforcing risk appetite even as the policy path looks less dovish than the consensus had assumed.
Europe’s inflation is back at the European Central Bank’s 2% target and policymakers see little urgency to cut further. Political and fiscal uncertainty in France has widened OAT–Bund spreads, while the UK remains the laggard. The Bank of England did not cut, ‘gradual cutting’ is off the table, and the delayed Budget keeps tax-policy uncertainty alive – a mix that risks weaker data alongside sticky inflation. Japan stayed on hold, broadly in line with expectations.
Against this backdrop, we have trimmed portfolio duration from around 4.8 years to 3.8 years, positioning for a steeper curve as growth stabilises and tariff effects percolate. We currently run without additional hedges, reflecting our conviction that the next leg in yields is more likely higher at the long-end than lower at the front. Our focus is firmly on quality coupon income: we are selectively adding secondary-market bonds with yields above 6%, often with call or maturity dates two to three years out, where we can harvest elevated carry before new issuance trends drive coupons lower. Recent primary deals have already come at tighter spreads and reduced coupons, suggesting we may have passed ‘peak coupon’ in new issue markets.
In high yield, we remain slightly under-beta. While we would like to add risk, the sell-off we were waiting for has not materialised, so we are adding primarily via the secondary market rather than chasing new issues.
Geographically, we have shifted focus back toward the US, which is once again outperforming, while maintaining exposure to large European banks in dollars and euros. At the same time, we are deliberately avoiding CCC-rated credits and keeping emerging market (EM) exposure limited. EM corporates can make sense selectively, but overall spreads are tight and idiosyncratic risks remain elevated, leaving us more comfortable concentrating on quality developed-market issuers.
As ever, our priority is to capture reliable income while managing risks with discipline. This is where active, high-conviction management can truly add value – navigating shifting cycles, locking in opportunities, and maintaining a focus on quality.
Fixed Income
Mirabaud Global High Yield Bonds
Fixed Income
Mirabaud Global Strategic Bond
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