Fixed Income 2025 Return of the Sovereigns

• We have a positive outlook for fixed income assets in 2025. With economic output generally below trend and inflation quite tame central banks can cut policy rates further.
• Some countries are experiencing a pronounced softening in growth and inflation, their central banks can move faster while others may take longer to get to a more neutral or accommodative policy setting.
• That most likely means higher volatility in sovereign debt markets in the coming quarters, but that uncertainty may offer investors tactical opportunities to build or expand their duration positioning through divergent easing cycles.

The final few months of 2024 provide a great illustration of how markets sometimes swing from optimism to despondency in short order. We assess the state of Fixed Income in 2025 and where the markets are likely headed.