2025 fixed income outlook: favorable environment for sovereigns

Lingering uncertainty may offer fixed income investors tactical opportunities in 2025 to build or expand duration positioning through the easing interest rate cycle. 

 

In general, we see several trends shaping the fixed income landscape:

 

1. Sovereign bonds: duration rewarded as rates fall

2. Investment grade (IG) credit: living with tighter spreads

 

3. High yield (HY) bonds: returns via declining underlying yields

 

4. Emerging market (EM) debt: a value-add for investors

 

Ready to react – and be active

 

Swings in sentiment and bouts of volatility should create opportunities for investors in 2025 to manage or extend duration. With a high likelihood of there being limited scope for further spread compression, coupled with a maturing credit cycle, investors can expect dispersion and volatility. 

In short, taking an active approach to credit will likely count.

 

 

Click here to explore the latest fixed income outlook from State Street Global Advisors.

 

 

_Disclosures  

 

_{For investment professional use only.}

 

_{Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. T: +852 2103-0288. F: +852 2103-0200} 

 

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_{Investing involves risk including the risk of loss of principal. Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.}

 

_{The views expressed in this material are the views of State Street Global Advisors through the period ended November 30, 2024 and are subject to change based on market and other conditions.} 

 

_{This page may contain certain statements deemed to be forward-looking statements. All statements, other than historical facts, contained within this document that address activities, events or developments that SSGA expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions and analyses made by SSGA in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances, many of which are detailed herein. Such statements are subject to a number of assumptions, risks, uncertainties, many of which are beyond SSGA’s control. Please note that any such statements are not guarantees of any future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.}

 

_{All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.}

 

_{Past performance is not a reliable indicator of future performance.}

 

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_{7351269.1.1.APAC.INST | Exp. Date: 11/30/2025} 

 

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