Displaying items by tag: fixed income

Markets entered 2025 on strong footing but were quickly rattled by earlier-than-expected U.S. tariff actions, delaying anticipated rate cuts and fueling volatility across equities, Treasuries, and currencies. AllianceBernstein expects moderate—not recessionary—growth in the second half, with fiscal and trade policy, Fed actions, and geopolitics serving as key macro drivers. 

Credit markets have shown resilience, and despite tighter spreads, elevated yields make high-quality issuers—particularly BB-rated bonds—attractive for income and risk management. With inflation expected to peak by the third quarter, the firm favors short-to-intermediate bond maturities to balance yield opportunities against interest-rate risk. 

Equity markets, while volatile in early 2025, have since broadened beyond U.S. tech leaders to global and value-oriented sectors, especially in Europe where banks and dividend payers stand out. 

Finsum: Multi-asset income strategies as well-positioned for this uncertain backdrop, combining yield, diversification, and adaptability amid shifting policy and market conditions.

Amid growing advisor interest in fixed income, American Century’s Joe Gotelli highlights municipal bonds as a timely opportunity, especially after recent market dislocations tied to fiscal uncertainty and tariff concerns. 

Despite early 2025 volatility, muni valuations remain appealing compared to taxable bonds, offering tax-free income and potential for excess returns as the Fed nears possible rate cuts. Gotelli notes that long-duration, high-quality muni assets may benefit in a softening growth environment, positioning investors for attractive long-term yields. 

American Century’s active muni ETFs—such as the Diversified Municipal Bond ETF (TAXF) and California Municipal Bond ETF (CATF)—use flexible strategies to manage duration, credit quality, and sector exposure while maintaining tax efficiency. Gotelli emphasizes Active management provides an advantage over passive approaches by allowing deeper credit research and selective exposure to specialized sectors like charter schools and tobacco settlement bonds. 

Finsum: Active ETF Fixed Income, gives investors innovative tools to navigate complex tax and interest rate dynamics.

Emerging market (EM) bonds are increasingly attractive as EM governments have shifted from deficits to surpluses, while developed markets (DM) have accumulated debt and fiscal imbalances. EMs maintain stronger fundamentals, including lower government and private debt, greater central bank independence, and higher real policy rates, factors that enhance stability and yield potential. 

Unlike DMs, EM policymakers have generally resisted moral hazard, allowing inefficient firms to fail rather than absorbing private risk, preserving long-term financial health. Over the past three decades, EMs have achieved persistent current account surpluses through fiscal discipline, contrasting with DMs’ crisis-prone fiscal dominance and policy coordination.

Actively managed EM strategies, such as VanEck’s, have demonstrated resilience through global shocks, reinforcing the case for a strategic EM debt allocation in modern portfolios.

Finsum: With DMs constrained by debt and low yields, EM debt offers compelling diversification benefits, higher returns, and sounder fundamentals.

Meta’s $30 billion bond sale drew demand four times greater than supply, underscoring strong investor appetite despite the company’s stock plunging more than 11% after disappointing earnings. The funds will support Meta’s aggressive AI expansion, which some analysts say reflects Mark Zuckerberg’s relentless spending, but one backed by over $100 billion in annual revenue. 

While shareholders worry about mounting costs, debt investors see little repayment risk, especially as Meta’s recent quarterly income, excluding one-time charges, topped $18.6 billion, surpassing major corporations combined.

Analysts argue demand for Meta’s bonds stems from investors seeking stable, high-quality issuers rather than fear of missing out on AI. By contrast, unprofitable AI startups like OpenAI or Anthropic remain reliant on equity financing, as debt markets favor established tech titans with proven cash flows and tangible assets.

Finsum: Other tech heavyweights are also leveraging strong balance sheets and low borrowing costs to fund infrastructure such as data centers and GPUs, so infrastructure could be a play. 

Coinbase Asset Management and Apollo have partnered to launch tokenized credit products, combining Apollo’s private credit expertise with Coinbase’s blockchain infrastructure to introduce new stablecoin-backed strategies in 2026. Their initiatives follow the GENIUS Act, which established the first U.S. federal framework for stablecoins and is expected to drive the market to $3 trillion by 2030. 

Meanwhile, fund managers such as Hamilton Lane and Laser Digital have begun tokenizing credit funds via KAIO, a protocol purpose-built for institutional-grade onchain assets, with over $200 million already tokenized. KAIO, backed by Nomura, recently integrated with the Sei blockchain to provide fast, compliant access to funds like Hamilton Lane’s senior credit platform and BlackRock’s ICS US Dollar Liquidity Fund. 

In a related move, Securitize announced plans to go public through a merger with Cantor Equity Partners II, valuing the company at $1.25 billion and positioning it at the forefront of a $19 trillion market for real-world asset tokenization.

Finsum: Demand for tokenized assets is rising sharply, with Broadridge reporting that while only 15% of asset managers currently offer tokenized funds, 41% plan to do so soon.