The compelling case for short-dated bonds

Amid tariffs, bankruptcies, and uncertainty, credit fundamentals remain strong. Elevated yields and solid corporate balance sheets favour income-focused fixed income strategies over government bonds, even as volatility persists.

Oil prices have been gathering headlines in the last few weeks. After falling below the $60 per barrel mark, the West Texas Intermediate price (WTI) bounced back strongly as a result of fresh sanctions announced against the two Russian giants, Lukoil and Rosneft.

The Net Zero Banking Alliance (NZBA) has formally ceased operations as a member-based organisation, following a vote by its remaining members. This marks the end of what we believe is one of the most significant collective efforts to align global banking with the goal of net zero emissions by 2050.

As we begin the final stretch of 2025, market conditions appear challenging. Inflation remains sticky across a range of economies, preventing major central banks from enacting rapid rate cuts to support GDP growth.

Amidst an economic data blackout caused by the US government shutdown, markets received a bit of positive news on Friday with the release of the US CPI report which showed consumer prices in September increased at a slower pace than expected.

France’s chronic government paralysis repeatedly created headlines this month, and fixed income markets are rightly worried about the sustainability of French government borrowing levels. Meanwhile, forecasts of a £50bn blackhole in the UK’s public finances are keeping gilt yields elevated and have made this November’s UK Budget a potential flashpoint.

Earlier this month, we wrote about the high cost of staying in cash in the Euro market. In that note, we argued that a combination of inflation, low front-end rates and steeper curves, favoured a rotation out of cash and cash like instruments into other alternatives that delivered better real returns, including credit. Building on this argument, we wanted to extend this perspective to the US dollar market and highlight a few key points.

The labour market in the UK continues to cool off along the lines of what the Bank of England (BoE) expects. Yesterday, the Office for National Statistics (ONS), released its monthly labour market data report, highlighting a rise in the unemployment rate and a reduction in some wage inflation measures.

As fixed income investors face inflation surprises, tariff rhetoric and growing concerns around central bank independence, Gordon Shannon, Partner and Co-Head of Investment Grade, explains why the focus remains on resilience.