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Income Generator: Beyond the Inflection Point

Volatility across the banking sector will likely mark an inflection point in policymakers’ current tightening cycle. We lay out five specific themes to help fixed income investors navigate the shifting markets.

A geometric purple flower.

4/10/2023

16 min read


Topic

Fixed Income

Key takeaways

  • As we get closer to the end of the rate-tightening cycle, investors should start to position for normalization of the yield curve.
  • Maximizing income per unit of risk remains the most critical investment decision to generate efficient fixed income returns.
  • The prospect of slower economic growth suggests an up-in-quality bias should persist as monetary policy remains restrictive and fiscal support unlikely.
  • Healthy fundamentals and very strong technicals should support municipal bonds and provide a buffer against broad market volatility.
  • For global yield, investors should consider swapping to U.S.-dollar fixed income exposure from non-U.S.-dollar exposure.
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