T. Rowe Price examines how the surge in AI-related bond issuance is affecting Treasury yields, corporate credit curves and portfolio construction. Arif Husain, Steve Boothe and Mark Stodden discuss hyperscaler debt, data-center financing, duration risk and where investors may find value as AI capital spending expands.
Learn More T. Rowe Price examines how the surge in AI-related bond issuance is affecting Treasury yields, corporate credit curves and portfolio construction. Arif Husain, Steve Boothe and Mark Stodden discuss hyperscaler debt, data-center financing, duration risk and where investors may find value as AI capital spending expands.
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T. Rowe Price examines how the AI infrastructure buildout is expanding financing needs across investment-grade bonds, securitized credit, private credit, leveraged finance and equity-linked debt. Mark Stodden and Tom Dignacco explore how investors can assess opportunities and risks across an increasingly complex mix of AI-related financing structures.
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T. Rowe Price examines how a potentially very strong 2026–27 El Niño could affect sovereign markets through food inflation, hydropower stress, weaker growth, fiscal costs and external balances. The research emphasizes that physical climate exposure alone does not determine investment risk, with country-specific buffers, policy responses and market pricing shaping the ultimate outcome.
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T. Rowe Price examines how investment-led fiscal policy, AI infrastructure spending and growing capital needs are reshaping credit markets. The authors argue that capital scarcity, persistent inflation and a larger supply of duration may create a more volatile regime that rewards selectivity, balance sheet analysis and flexible financing capabilities.
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T. Rowe Price sees potential near-term support for the U.S. dollar from monetary policy expectations and fiscal expansion, while maintaining a more cautious longer-term outlook. Structural pressures include reserve diversification, changing U.S. trade and immigration policies, and the potential fading of fiscal support after the midterm elections.
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The debate between stable value portfolios and money market funds has reignited, as defined contribution (DC) consultants expect increased plan sponsor interest in reviewing/revisiting their plans’ capital preservation investment options.
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Tight credit spreads do not tell the full story of today’s global high yield market. T. Rowe Price highlights attractive yields, improved credit quality, low default rates and a broader global opportunity set as factors supporting the asset class.
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Passive investing, retail participation and AI are changing how prices form across financial markets. T. Rowe Price examines how shifts in ownership, trading flows and investor behavior are affecting volatility, price discovery and the role of fundamental analysis.
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Quantamental investing combines quantitative techniques with fundamental research to identify bond-market inefficiencies and assess credit risk. T. Rowe Price explains how this approach may help investors seek modest excess returns while maintaining benchmark-like risk and low tracking error.
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Near-term economic strength, fiscal expansion and market expectations for Fed policy may support the U.S. dollar in the months ahead. T. Rowe Price explains why longer-term structural pressures could eventually outweigh those tailwinds.
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Global fragmentation, artificial intelligence infrastructure spending, energy security concerns, and renewed inflation pressures are creating a more selective and capital-intensive investment environment—one where active investors may find broader opportunities across sectors, regions, and asset classes.
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T. Rowe Price’s Colin McQueen explains why international markets have become more competitive, supported by inflation, higher interest rates, industrial investment, and corporate reform in Japan. The article highlights how earnings growth has broadened beyond technology and why the valuation gap between U.S. and international equities has narrowed.
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When evaluating market prospects in the wake of the Middle East conflict, recall the state of the economy before the outbreak of war and then consider what’s changed.
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AI-fueled massive capital investment is reshaping credit markets and could create new opportunities for investors looking to navigate the changing landscape.
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The scale of artificial intelligence-related capex is one of the largest investment cycles in modern corporate history. Our analysis suggests that this cycle can continue for another two to three years before facing its first true test. The greater risk lies in monetization lagging investment, creating volatility in sentiment.
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Our latest Insurance Insights highlights opportunities for insurers to lock in durable portfolio income amid a dynamic policy and market environment. Recent global developments—including Latin American reforms and the U.S.-driven agency mortgage backed-securities (MBS) purchase mandate—are reshaping the risk landscape, with emerging market debt and high-quality securitized assets offering attractive yield and diversification.
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Discover why yields may rise, U.S. growth could surprise, and volatility remains a key risk for fixed income in 2026.
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To address preconceived ideas around global government bonds, we have undertaken a three-part study analyzing returns and volatility. We then break down the components of a bond return and reconstruct a U.S. Treasury bond index to test the power of incorporating a broader set of global intrinsic factors.
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AI is driving real change, but bubble concerns are growing. Investors must balance exposure to AI with broader opportunities and enduring risks in 2026.
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The recent barrage of Big Tech bond issuance has tested long-end spreads, with the IG credit curve steepening 10-15 bps over the past month. This development reinforces the committee's October recommendation to underweight long-end IG corporates, which have underperformed shorter-duration alternatives. The resilient economy, prudent underwriting standards, fiscal and monetary policy easing in tandem, and supportive technical backdrop reinforce our constructive stance on credit despite limited spread cushion.
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China’s government has announced a series of capacity consolidation measures, labeled its “anti-involution” strategy, to curb loss-making for companies in several industries. In this article, we explore how reductions in China’s export supply could have important global macroeconomic implications.
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T. Rowe Price's Sector Strategy Advisory Group maintained a neutral risk stance with a structural overweight to credit for October 2025, emphasizing high-quality carry and floating rate exposures as core positioning themes.
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In today’s financial markets, market volatility creates both challenges and opportunities for investors. The challenges lie in anticipating and adapting to erratic price movements. The opportunities stem from those same sudden shifts, which can produce market inefficiencies that skilled investors may be able to exploit, either to reduce risk or to enhance returns.
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With the Federal Reserve in easing mode, the question many clients have been asking me is whether I still expect the 10‑year U.S. Treasury yield to head toward 6%. The short answer is yes. However, the recent move lower in Treasury yields has compelled me to reexamine my thesis for higher U.S. long‑maturity rates and a steeper yield curve. My simple conclusion is that, from a “linear” perspective of the normal drivers of Treasury yields, the only factor that has changed is the current yield level.
Read More T.Rowe Price’s Sector Strategy Advisory Group adopted a risk-neutral stance in September, reflecting a pragmatic pivot in the face of richening valuations and moderating technical support. Importantly, this neutral position implies a structural credit overweight within our framework reflecting a preference for capturing carry given technicals and fundamentals generally remain solid despite stretched valuations.
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Markets stand at a pivotal crossroads, where robust earnings and the promise of artificial intelligence-driven productivity balance the headwinds of a slowing economy and stretched valuations—all under the watchful eye of an accommodative Fed.
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Join us for the latest edition of our bi-annual webinar series ‘Ahead of the Curve’, where we will explore the intricate interplay between global bond markets, fiscal policies and economic planning. This sovereign debt centered webinar will analyse how bond markets function as potent catalysts in shaping financial strategies, and the opportunities and risks this presents to investors.
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With a U.S. government shutdown proceeding as expected on October 1, markets are preparing for the potential delay of critical economic data, including Friday’s nonfarm payrolls report for September. Economic and financial market effects could be modest based on prior shutdown episodes. The duration of the shutdown remains uncertain.
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The T. Rowe Price Fixed Income Platform’s high-conviction that inflation expectations are set to move higher over the next 3–12 months presents a timely and actionable opportunity for investors. Current market pricing, in our view, does not fully reflect the magnitude or persistence of the inflationary pressures building in the U.S. economy. We believe properly positioned portfolios can benefit from a potential repricing of inflation risks, offering both return potential and crucial diversification in an environment of heightened macro uncertainty.
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Are you ready for a world where the 10-year U.S. Treasury yield goes to 6%? Explore why such a shift may occur, what the asset allocation implications are, and what strategies can help to effectively navigate this landscape.
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Tariffs had been a key driver of the S&P 500 Index until July, when the stock market gained ground despite uncertainty around industry‑specific tariffs and whether the U.S. and key partners would be able to hash out new trade frameworks in time (Figure 1). The factors driving this divergence are important to understand in assessing the policy and market environment.
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The One Big Beautiful Bill Act marks a shift in fiscal policy, with the potential for a boost in corporate profits through investment-oriented provisions. Explore how this could impact different sectors and be supportive for credit markets.
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In an uncertain environment, multi‑asset (MA) solutions are well‑suited for investors seeking capital growth, downside risk management and a steady income. However, the investment landscape in 2025 appears particularly tricky, with elevated trade and geopolitical tensions, macroeconomic risks, and unease about rising global debt. This confluence of factors could potentially cause typical cross‑asset class correlations to break down.
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Donald Trump’s landmark tax and spending bill is sharpening the focus on the country’s challenging fiscal position for financial markets. This bill could be passed as soon as this summer, and here we explore the potential implications for the deficit, economy, and bond markets.
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Impact investment markets have evolved greatly in the past few years in terms of complexity, breadth, and even definition. Active managers in this space therefore need to be agile, adapt to these adjustments and help ensure that their impact assessment frameworks remain relevant.
Read More We Believe the Market is Underestimating Inflation and Longer-Term Interest Rates
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Arif Husain, head of Global Fixed Income and CIO, sees U.S. growth remaining uncertain, but inflation risks are rising with tariffs and fiscal policy. The Fed is in a difficult spot as it monitors incoming economic data.
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Even with geopolitical risk erupting in the Mid East in recent weeks, delayed and recalibrated U.S. tariff policy in conjunction with resilient U.S. economic and corporate fundamentals had allowed risk assets to largely retrace to levels that existed in late February before the worries of a looming “Liberation Day” began to be fully priced into markets. Helping this “retracement” narrative further in recent weeks have been:
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A combination of tariffs and German fiscal reform have led to a weaker outlook for sovereign debt and a stronger one for credit and some emerging markets.
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According to Eric Veiel, CFA®, Head of Global Investments and Chief Investment Officer at T. Rowe Price, this investment outlook highlights that 2025 has brought unexpectedly rapid changes driven by trade policy shifts and deglobalization, particularly between the U.S. and China. This process is reconfiguring global markets with significant implications for investors.
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Securitized credit markets posted relatively resilient performance in the first quarter of 2025, outperforming U.S. investment-grade corporates, high yield bonds, and bank loans on an excess return basis. Issuance across the four major securitized sectors moderated from late 2024’s heavy pace but remained healthy relative to historical averages.
Read More Early April U.S. Treasury Market dysfunction has largely abated for now— Elevated concerns around U.S. Treasury market functioning that had some connection to a paralysis of certain hedge funds who, due to a spike in equity market volatility, had to “pause” in their Treasury market making role has abated for now. As a result, Supplementary Leverage Ratio (SLR) reform that would allow U.S. banks to be more actively involved in U.S. Treasury market functioning is an area that may be part of the Budget Reconciliation legislation that is expected to pass before Congress’s August recess.
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The "Shifting Momentum" webinar hosted by T. Rowe Price's Multi-Asset Division focused on navigating the current uncertain policy environment and tactical asset allocation positioning.
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Tariffs and fiscal expansion could drive U.S. Treasury yields higher. Inflation risks loom, but energy prices may offer some relief. Explore strategies for inflation protection.
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Our Diversified Income Bond Strategy is an actively managed flexible “go‑anywhere” core bond strategy. We believe it offers three key benefits of attractive income potential, a truly global portfolio, and a controlled risk profile.
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Tariffs create uneven outcomes. Economically, more U.S. consumers and corporations are likely to be negatively impacted compared with the beneficiaries. However, policy changes present opportunities for active managers. In fixed income markets, we see advantages in a globally diversified approach.
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For several years now, cash has been king. But there is an opportunity cost to staying parked in cash—missing out on capital appreciation opportunities elsewhere. With this in mind, we think it is time for investors to consider redeploying cash. But where? With bond yields still at elevated levels, we believe that fixed income is an attractive asset class for putting cash to work—especially for investors seeking to lock in income.
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Despite the growth of passive investing in the fixed income space in recent years, active management continues to dominate the multi‑trillion‑dollar bond market. With there being inherent challenges of replicating a bond index, active managers have taken advantage of ample opportunity to navigate around what has been a secular rising interest rate trend in recent years. Since the global financial crisis of 2008/2009, the average trailing three‑year Intermediate Core Bond Plus active manager outperformance of the Bloomberg US Aggregate Bond Index has only trailed that of the Intermediate Core Bond passive managers for a few brief periods in 2015 and 2019.
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Investors are reeling from the worse-than-expected level of tariffs announced on Wednesday, further exacerbating already high levels of uncertainty. Either triggering negotiations or retaliations, a quick fix seems unlikely. While near-term global growth expectations worsen, the longer-term impacts on global order could be even more worrisome.
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Discover T. Rowe Price's latest insights, authored our experts to guide you through the dynamic financial landscape. As we address rapidly changing trade tensions and their effects on markets, the global economy, and the investment environment, we offer a curated collection of recent insights from our diverse investment teams.
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Our Asset Allocation Committee (AAC) is positioned for the U.S. 10-year Treasury yield to rise. In bond parlance, we are short duration. Inflationary uncertainty, a flat yield curve, pro-growth policies, and significant deficits all point in that direction.
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Germany’s sudden move toward planning more government spending on defense and infrastructure is an extremely meaningful moment in the global high-quality sovereign bond market and financial markets in general. I see a clear parallel with former European Central Bank President Mario Draghi’s commitment to do “whatever it takes” on monetary policy to preserve the euro during the European sovereign debt crisis in 2012. Tomasz Wieladek, our European economist, makes the case that the German spending boost may be even more significant because fiscal expansion has longer-lasting effects than monetary policy.
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Which asset classes provide the best defense against a downturn in risk assets? The answer has evolved as market and economic conditions have changed over the years. We recently discussed this vital portfolio construction question with three T. Rowe Price experts: Arif Husain, Sébastien Page, and Adam Marden. Their answers illustrate the diversity of thought within T. Rowe Price, where collaboration between investment professionals with different views is a hallmark of our investment process. They agree that the U.S. dollar remains a defensive stalwart and discuss the merits of other assets, including long‑maturity U.S. Treasuries, cash, and value stocks.
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In times like these, what truly defines a defensive asset? Join our esteemed panel of senior fixed income experts for an insightful session in our ‘Ahead of the Curve’ Fresh Perspectives on Fixed Income series. Register today to gain valuable insights and strategies to navigate these uncertain times.
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InsuranceAUM.com recently joined the Day of Thought Leadership event focusing on reinsurance investment trends and challenges.
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Markets appear to be underpricing the possibility of a protracted trade war. If you blinked, you may have missed its reaction to Donald Trump’s announcement of tariffs against the U.S.’s neighbors, Canada and Mexico: The cold chill that followed the Friday, January 31, announcement had turned into a warm front by the following Monday as tariffs were delayed and market losses quickly reversed. So is Trump somebody who will take a sledgehammer to crack a nut or a misunderstood, deceptively pragmatic president who simply loves a deal? Tariff man has come out swinging.
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Since September 2024, the U.S. Federal Reserve (Fed) has lowered its benchmark interest rate by a full percentage point. However, the market’s reaction to the start of the Fed’s long‑anticipated easing cycle has been perplexing for many investors as yields on 10‑year U.S. Treasuries rose sharply over the period.
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As we step into 2025, it’s pretty clear that the strategies that worked wonders in 2024 might not cut it this year. Last year, the investment scene was all about carry and spread compression. Basically, taking on more credit risk paid off big time. High yield outshone investment grade credit, and investment grade credit did better than government bonds. The riskiest credits, like CCC-rated bonds, outperformed the BB space.
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There is an alarming trend that has developed over the past few months: U.S. Treasury yields have been climbing despite continued rate cuts from the Federal Reserve. The yield on the 10-year U.S. Treasury note reached a recent peak of 4.79% on January 14, 2025. While there has been a recent partial reversion in this trend, the broader path appears to remain upward.
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What do digital advertising, online retail, electric vehicles, and software have in common? Seemingly not a lot, other than a combined $20 trillion. The “Mag 7,” as they are known, are a heterogenous group of companies that have dominated global equity markets. Their combined market cap is now multiple times larger than other parts of the market and any other country outside the U.S.
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While most credit sectors’ spreads tightened early in the quarter, securitized sectors’ participation in the rally was anchored to the back half of the quarter, driven, in part, by a technical tailwind as demand outstripped supply as year‑end approached. For the fourth quarter, securitized credit generally outperformed investment‑grade corporate credit of comparable duration1 and quality.
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U.S. immigration policy changes could meaningfully reduce the labor force. This could have impactful economic consequences, such as renewed upward pressure on wages, which could push inflation higher. Resurgent inflation would, in turn, influence Federal Reserve decisions on interest rates.
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The new U.S. administration’s planned tariffs will damage global trade, negatively impacting both the U.S. and its trading partners. A stronger dollar will likely create a demand shock, triggering a wave of central bank rate cuts and weakening equity markets. The countries most at risk include the manufacturing hubs of Asia and Eastern Europe and the U.S.’s close trading partners Canada and Mexico.
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In today’s uncertain markets, we believe that fixed income is attractive, as there’s an opportunity to generate potential income alongside other specific objectives. In this piece, we are delving into the characteristics of four different bond solutions and how they align to distinct investment goals.
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Join special guest David Giroux, CIO of T. Rowe Price Investment Management and Sébastien Page, T. Rowe Price’s head of Global Multi-Asset and CIO; moderator Christina Noonan, multi-asset portfolio manager; for a discussion on opportunities, risks, and portfolio positioning in evolving markets.
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When our global fixed income portfolio managers and analysts gathered as a team for our usual monthly policy week meetings in mid‑December, our email inboxes were brimming with year‑ahead outlooks. The conclusion we came to was that, in broad strokes, everyone thinks the same. Yes, there may be some differences in asset recommendations, but at the heart of it, the vast majority look forward to another good year of U.S. growth, buttressed by loose financial conditions, a supportive Federal Reserve, and possibly renewed fiscal stimulus.
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Investor interest in versatile multi-asset credit (MAC) portfolios has notably increased after the 2022 credit market downturn. Due to the flexible nature of MAC portfolios, investors perceive these mandates as capable of tactically allocating among credit sectors in an effort to enhance returns and reduce volatility, especially on the downside. Are investors getting what they seek from these strategies?
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Between the U.S. election and the presidential inauguration, markets are now in a “calm before the storm.” Investors are working through the implications for U.S. Treasury yields. I continue to expect higher intermediate‑ and long‑term Treasury yields, steepening the curve as Federal Reserve (Fed) rate cuts anchor short‑term yields. As I outlined before the election in “Could a 5% 10‑year Treasury yield be around the corner?,” we could reach that level as soon as the first quarter of 2025.
Read More Although valuations for securitized credit sectors aren’t screaming cheap following solid year-to-date performance, fundamentals remain benign, and our research platform continues to see pockets of value. Yields also remain attractive for investors seeking income and diversification.
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The 10-year U.S. Treasury yield could reach 5% due to fiscal stimulus in an election year, supply/demand dynamics from Fed quantitative tightening, and higher term premiums driven by inflation expectations.
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With the Fed widely expected to cut rates in September, we looked at how different asset classes performed during past cutting cycles. Bonds consistently outperformed cash and stocks often outperformed bonds, but the evidence is less clear for small-cap versus large-cap and other trade-offs.
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Artificial intelligence (AI) has captured the imagination and enthusiasm of investors around the globe. While the market often focuses on AI in the context of equity opportunities, the fixed income market is likely to play an increasingly important role in financing digital infrastructure growth. Data center operators and developers are tapping a range of debt financing sources to fund their AI-related infrastructure investments, including the asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS) markets. We have been finding attractive value in some of these securitizations backed by data centers and other technology infrastructure, although a thorough analysis of both the collateral and the structures of the deals themselves is essential.
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Many people are familiar with the potential of artificial intelligence (AI) to enhance productivity across a range of industries and sectors. Although the secondary impacts of the rise of AI are sometimes less understood, they have significant implications. One is the need to service the growing AI infrastructure and meet the energy demands it’s generating. This in turn has significant implications for the credit quality of corporate bonds issued by companies that supply this energy and infrastructure.
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Bank of Japan tightening and its impact on the flow of global capital is far from simple, and it will have a large influence over the next few years. However, in the context of other mega-trends such as unsustainable fiscal expansion in some developed countries, volatility shouldn’t be a shock.
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Securitized credit sectors performed well entering the second quarter (Q2), extending a strong run that began in late 2023, when Federal Reserve policymakers signaled that the rate-hiking cycle was probably finished. But the prolonged rally lost steam around late April/early May as investors became fatigued in the face of rampant new issuance, which has been a key theme for our markets this year. Credit spreads drifted wider over the subsequent two months and generally ended Q2 near where they started. Still, total and excess returns largely remained in positive territory due to the sectors’ yield premiums versus U.S. Treasuries (Figure 1).
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Investors should be wary of the heightened volatility and extreme price swings in bond markets due to the growing inelasticity of passive fixed income investing
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The rapid increase in U.S. nonbank lending has caused banks to shift their risk exposure toward liquidity risk and away from credit risk. The effects of this shift could interact with the Federal Reserve’s quantitative tightening (QT) program, potentially forcing the central bank to end QT.
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The T. Rowe Price Sector Strategy Advisory Group (SSAG) is comprised of select Fixed Income investment professionals, specializing in a range of disciplines, who collaboratively generate investment ideas for use in portfolios across our platform. Views are based on SSAG research and discussions, combining fundamental analysis from sector specialists with insights from our quantitative research experts and proprietary tools. Views are intended to be tactical, are as of the date indicated, and are subject to change.
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President Joe Biden’s decision to drop out of the election introduces another element of uncertainty to the race. The situation is evolving quickly. However, the key issues and policy differences should remain the same.
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Financial regulators would likely be more proactive and involved under a Democratic president than in a Republican administration.
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While investors were already expecting the possibility for heightened volatility around a packed global election calendar, those risks have only been amplified with the recent snap elections in France and the U.K. Discontent with incumbent leaders has been a common theme leading to several opposition party wins, with economic, trade, and immigration policies and corruption also contributing to voter dissatisfaction.
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Join Sébastien Page, T. Rowe Price’s head of Global Multi-Asset and CIO; our special guest Rob Sharps, CEO and president of T. Rowe Price Group, Inc.; and moderator Christina Noonan, multi-asset portfolio manager; as they discuss their outlook—including perspective on market trends, the importance of active management, and positioning in our multi-asset portfolios.
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At midyear, expectations for rate cuts have been pushed out further, with far fewer anticipated, and markets have repriced accordingly. We anticipate growth in the global economy—however, while the U.S. economy remains strong, leading indicators suggest that the narrative of U.S. exceptionalism may fade. We see continued market broadening, with select equity and fixed income opportunities. Most importantly, the ongoing transition from the low rate post-global financial crisis environment to one characterized by higher interest rates may provide favorable conditions for active managers to outperform.
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Credit markets have the flexibility to support a range of investor goals and risk tolerances. But given the current climate of tight credit spreads, a soft macro environment, and the rising cost of financing, some investors may be apprehensive. To help instill confidence, investors should consider solutions that emphasize deep fundamental credit research. This should help to uncover inefficiencies, manage risks, and confidently navigate uncertain markets.
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U.S. economic growth has outperformed other developed markets, leading to divergent monetary policy expectations. A slowdown in U.S. GDP and employment growth could lead to narrowing outperformance and congruent monetary policy paths. However, other factors support longer-term divergence.
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With the path of cash rates uncertain, we think it is time for investors to consider redeploying into the market. But where? With bond yields near historic highs, we believe that fixed income is an attractive asset class to put cash to work—especially for investors seeking to lock in income.
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“The New Normal was abnormal.” The near-zero interest rates of the last decade heavily favored growth stocks, but gravity has returned to financial markets. A tactical tilt to value stocks might be warranted over the longer term.
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The rally in securitized credit market that began in late 2023 accelerated in early 2024 even as the Federal Reserve pushed back on the market’s high expectations for rate cuts. Amid less enticing valuations, we still see pockets of value, supportive technical conditions, and decent fundamentals.
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An increasingly prominent environmental issue is the declining health of the world’s oceans. Blue bonds have emerged as a critical tool in potentially attracting investment into the blue economy and play a part in providing finance to help address the pressing issue of ocean health.
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Like other sustainable debt, blue bonds need to be evaluated differently to mitigate against bluewashing risks. There are four areas that are critical to analyze, including the issuer’s sustainable Investing profile, alignment with industry standards, bond creditability, and post-issuance reporting.
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Judging by my conversations with clients around the world in the first quarter of 2024, many investors have realized that they are underallocated to emerging markets in their global fixed income portfolio. This is, in part, a response to the eye-catching returns of emerging market debt in 2023, when it easily outperformed both global developed market bonds and U.S. investment-grade debt.
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As the Dynamic Global Bond Strategy celebrated its 10-year anniversary since launch in February, we analyze the key drivers for performance, whether the strategy has kept up with the changing times, and if it is still relevant in a market environment that is a mirror image of the time when it was launched.
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For insurance companies, corporate bonds offer attractive income, but security selection is imperative as rising headwinds could lead to defaults picking up.
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Saurabh Sud passed his five-year anniversary as portfolio manager of the Dynamic Credit Strategy!
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Credit markets remain a compelling income-generating opportunity. But with headwinds rising, some investors may be feeling apprehensive. In this piece, we’re delving into the dynamics and how an approach that prioritizes research can help to instill confidence about credit investing in 2024.
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Securitized credit markets joined in the year-end cross-asset rally, fueled by a discernable shift in the Federal Reserve’s tone, leading to broad gains in 2023 and strong tailwinds entering 2024. With credit-risk premiums much lower, we analyze the opportunities seen in the new year.
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The aggressive monetary easing priced in to markets is simply an average of expectations priced in across a range of potential outcomes, so it can be deceiving.
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New U.S. regional bank debt can lower the odds of a default and help reduce the cost of a failed bank, but this requires holders to discipline riskier banks.
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Portfolio Manager Steve Boothe highlights factors that could cause energy productivity to wane and usher in a bull market for oil and gas. These changes in productivity could create opportunities for energy credits.
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Even after the late-year “Santa” rally, all-in yields in many credit sectors are near multi-decade highs, making it tempting to portfolio managers to have overweight credit allocations to maximize the yield opportunity. But credit spreads are relatively narrow and the distinct risk of an economic or financial market recession looms eventually, so managers might opt to underweight credit sectors.
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Active management of high yield bonds offers several advantages over a passive approach, in our view.
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A flood of new global sovereign debt will affect market dynamics.
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Transformations have bolstered high yield for a modest downturn.
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Securitized credit markets produced mixed results in the third quarter. Despite a steep rise in U.S. Treasury yields, credit investors appeared more confident that the Federal Reserve could engineer a soft economic landing. Securitized credit was generally resilient, aided by light supply, which helped to offset gradually deteriorating fundamentals.
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The credit quality of the high yield market has drastically improved since the global financial crisis (GFC). Meanwhile, unprecedented quantitative tightening and related recession fears have led to rate and credit spread volatility since the first quarter of 2022, resulting in attractive yields and dollar discounts not seen since the GFC.
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After a solid first-half performance, what does the remainder of 2023 look like for emerging markets (EM)? It could be more of the same, but it will be important to keep an eye on China and whether the slowdown there drags down the rest of EM and weighs on sentiment. For now, we are seeing resiliency on the growth side, while inflation has come down quickly. On the monetary policy front, several countries are positioned to embark on an interest rate-cutting cycle soon—striking out ahead of their developed market peers—which is an encouraging sign that EM is maturing as an asset class.
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Since early April, securitized credit markets maintained the positive momentum that transpired following March’s banking system distress. Improved investor sentiment supported demand for risk assets broadly, benefiting securitized assets. A moderation in high interest rate volatility and signs that the Federal Reserve was near the end of its tightening cycle were positive factors for more interest rate-sensitive areas such as residential mortgage-backed securities, which enjoyed a strong quarter. Supply technicals remained highly supportive, but fundamentals are gradually worsening, and valuations have become more fair than cheap, resulting in a relatively neutral outlook for the asset class. However, yields are broadly attractive for long-term-oriented investors. We saw the best opportunities in high-quality asset-backed securities and collateralized loan obligations, had a balanced opinion of non-agency residential mortgage credit, and remained cautious on commercial mortgage-backed securities.
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Introducing the Net Zero Transition Product Framework, which seeks to deliver financial returns and manage risk while promoting energy transition. Category: ESG
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Recent hawkish stances taken by some major developed market central banks raise the question of whether we are entering the zone of a global monetary policy mistake. There is now a meaningful risk that these central banks could overtighten in their quest to quell inflation and help push the global economy into recession.
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The deal to suspend the limit on the U.S. government’s borrowing averted a default but also appears to mark a new era in fiscal policy, with growth in federal spending moderating for at least the next two years and perhaps longer.
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In this Q&A, we sit down with Siby Thomas, co-portfolio manager for the Emerging Markets Corporate Bond Strategy, to discuss the importance of environmental, social, and governance (ESG); his approach; and the key trends to watch out for in this space in the future.
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Matt Lawton gives an overview of the characteristics and attributes of the Global Impact Credit strategy.
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When managing interest rate risk, it’s important to go beyond duration as risk and alpha opportunities can also be found in country selection, convexity, curve positioning, and security selection.
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Securitized credit markets experienced a choppy rebound to start 2023. We discuss the driving factors and what’s next.
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The Dynamic Credit Strategy seeks to offer investors a “smoother ride” in credit investing by finding diverse alpha sources in a variety of market environments. The strategy focuses on credit selection and sector rotation across the credit spectrum by harnessing expertise across T. Rowe Price’s global multi-sector research platform.
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Impact investing has gained traction in recent years to address the needs of investors seeking a more values-based investment approach. We brought together our three impact portfolio managers to discuss the rise of impact investing and how they see the sector evolving.
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After a challenging period, bond markets are better priced for the new realities of high inflation and tighter monetary policy. Therefore, we have identified five flexible bond opportunities to help investors navigate the current market environment.
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After a difficult year, securitized credit markets exited 2022 with positive momentum that carried over into early 2023. Valuations remain attractive relative to corporate bonds, yields are sitting well above their long-term averages, and we believe that strong bond pickers could be rewarded as fundamentals come under greater scrutiny.
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With one year having passed since the launch of the strategy, Portfolio Manager Matt Lawton answers questions about the evolution of impact investing over the past 12 months, activity within the strategy, successes and challenges, and what he is watching in 2023.
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The Fed is committed to do whatever it takes to get inflation back to healthy levels. In 2022, the rout in bonds helped to restore healthy yields but reminded investors that stocks and bonds can sometimes sell off at the same time. Meanwhile, a focus on socially oriented goals could lead to less predictable economic policy changes in China.
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There is a strong case to be made for active management in high yield bonds, in our view, with an active approach offering several advantages. Active management allows for fundamental analysis and security selection across the full high yield universe as well as the ability to nimbly reposition a portfolio to take advantage of macro trends.
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Central banks appear to intend quantitative tightening (QT) measures to run largely in the background. However, our analysis suggests that QT measures may have a much bigger economic impact than expected. This may result in banks tightening more than necessary in order to bring inflation down, potentially exacerbating recessionary dynamics.
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Companies are being measured not only by their earnings and cash flow, but according to the effect their activities have on the environment and society. As a result, credit investors no longer judge those companies solely on their risk and return characteristics, but increasingly by their external impact as well.
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High yield bonds, in our view, have a key role as a strategic long-term investment and a mainstay allocation in a well diversified portfolio. Historically, high yield bonds have provided equity-like returns with less volatility.
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Flexibility and a collaborative multi-sector approach, in our view, are essential components of fixed income portfolio management. We seek to combine well-diversified sector allocation with tactical insights to pursue consistent risk-adjusted returns across different market environments while capitalizing on bond market inefficiencies.
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Pranay Subedi of T. Rowe Price discusses the health of the private credit market, including BDC structures, liquidity risk, AI exposure, underwriting quality, and the outlook for credit losses.
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In this episode of The Angle from T. Rowe Price, Justin Thomson, head of the T. Rowe Price Investment Institute, sits down with Susan Carnicero, a former CIA officer and expert in detecting deception.
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On the latest episode of The Angle from T. Rowe Price, Intel CEO Lip-Bu Tan joins Eric Veiel on his The Long View series to discuss Intel’s transformation, AI infrastructure, customer focus, supply chain resilience, and the future of compute.
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Mark Rose, Insurance Solutions Specialist at T. Rowe Price and former CIO of Argo Group, joins the InsuranceAUM.com podcast to share lessons from his time in the CIO seat—and what he’s learned on the asset manager side.
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Join host Stewart Foley on the InsuranceAUM.com Podcast for expert insights into macroeconomic trends, including trade, fiscal policy, and the Fed's rate trajectory.
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Jean-Marc Breaux is the Sector Portfolio Manager, Fixed Income Division at T. Rowe Price.
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Paul Massaro is the Head of Global High Yield Franchise and a member of the Senior Management Asset Allocation Committee at T. Rowe Price.
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Steve Boothe is the Head of Global Investment Grade at T. Rowe Price.
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Arif Husain is the Head of International Fixed Income and CIO at T. Rowe Price.
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Bill Bohnsack is the President of Oak Hill Advisors.
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Join host Stewart Foley on the InsuranceAUM.com Podcast as we discuss impact investing, green bonds, and public fixed income strategies tailored for insurance investors.
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Join host Stewart Foley on the InsuranceAUM.com Podcast as we explore the nuances of floating-rate bank loans, high-yield credit, and the dynamics of rising rates with insights tailored to insurance investment professionals.
Read More1AUM data is as of 12/31/2025 and includes assets managed by T. Rowe Price Associates, Inc. and its investment advisory affiliates.