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Multi-Sector Credit Asset Allocation Perspectives: Emphasising carry in fixed income

Where do we see value now that credit spreads have retraced much of their 'Liberation Day' widening? What is driving our preference for carry in fixed income? What can consumer cash balances tell us about the US economy? We explore these and other questions in our latest Multi-Sector Credit Asset Allocation Perspectives.

John Lloyd

Global Head of Multi-Sector Credit | Portfolio Manager


Jul 31, 2025
4 minute read

Key takeaways:

  • Gross domestic product (GDP) growth is likely to come in strong for Q2 before slowing in the second half; slower but still positive growth can be a supportive backdrop for fixed income assets.
  • Front-end duration can hedge against a slower economy and potential Fed easing. We are less constructive on the back end of the yield curve given concerns around inflation and large government deficits.
  • Spreads have retraced most of the ‘Liberation Day’ widening but remain outside of year-to-date (YTD) tights; with fuller valuations, we prefer to emphasize carry (income) over convexity (capital movement from changes in spread).

The Multi-Sector Credit Team share perspectives on the fixed income market and their quarterly asset allocation ranking. They highlight a timely chart to watch, explore relative value opportunities, and provide insight on their latest asset allocation scores by fixed income sub-sector.

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IMPORTANT INFORMATION

Fixed income securities are subject to interest rate, inflation, credit and default risk. As interest rates rise, bond prices usually fall, and vice versa. High-yield bonds, or “junk” bonds, involve a greater risk of default and price volatility. Foreign securities, including sovereign debt, are subject to currency fluctuations, political and economic uncertainty and increased volatility and lower liquidity, all of which are magnified in emerging markets.

Securitized products, such as mortgage- and asset-backed securities, are more sensitive to interest rate changes, have extension and prepayment risk, and are subject to more credit, valuation and liquidity risk than other fixed-income securities.

Collateralized Loan Obligations (CLOs) are debt securities issued in different tranches, with varying degrees of risk, and backed by an underlying portfolio consisting primarily of below investment grade corporate loans. The return of principal is not guaranteed, and prices may decline if payments are not made timely or credit strength weakens. CLOs are subject to liquidity risk, interest rate risk, credit risk, call risk and the risk of default of the underlying assets.

Bank loans often involve borrowers with low credit ratings whose financial conditions are troubled or uncertain, including companies that are highly leveraged or in bankruptcy proceedings.

Diversification neither assures a profit nor eliminates the risk of experiencing investment losses.

Janus Henderson Investors makes no representation as to whether any illustration/example mentioned in this document is now or was ever held in any portfolio. Illustrations shown are for the limited purpose of highlighting specific elements of the research process. The examples are not intended to be a recommendation to buy or sell a security, or an indication of the holdings of any portfolio or an indication of performance for the subject company.
John Lloyd

Global Head of Multi-Sector Credit | Portfolio Manager


Jul 31, 2025
4 minute read

Key takeaways:

  • Gross domestic product (GDP) growth is likely to come in strong for Q2 before slowing in the second half; slower but still positive growth can be a supportive backdrop for fixed income assets.
  • Front-end duration can hedge against a slower economy and potential Fed easing. We are less constructive on the back end of the yield curve given concerns around inflation and large government deficits.
  • Spreads have retraced most of the ‘Liberation Day’ widening but remain outside of year-to-date (YTD) tights; with fuller valuations, we prefer to emphasize carry (income) over convexity (capital movement from changes in spread).