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By  Kenneth A. Orchard, CFA, Vincent Chung, CFA
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Fixed Income Insights: Current Investment Landscape

Fixed income experts, Ken Orchard and Vincent Chung leverage a broad fixed income universe.

May 2025

Key Insights
  • Opportunity Cost of Cash: Staying parked in cash for extended periods can lead to missed opportunities for capital appreciation. With bond yields at elevated levels, fixed income presents an attractive option for investors looking to redeploy cash and lock in income.
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  • Global Multi-Sector Bond Approach: This strategy offers diversification and flexibility by investing across various fixed income sectors, including government, corporate, and securitized debt. It aims to provide consistent income and mitigate risks, appealing to investors seeking both income and diversification.
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  • T. Rowe Price Diversified Income Bond Strategy: This "go-anywhere" strategy seeks to deliver high yield-like returns with investment-grade risk levels. It leverages a broad fixed income universe to identify attractive opportunities, aiming for a stable return and lower volatility through diversification.
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Summary

Our fixed income experts, Ken Orchard and Vincent Chung, provide valuable insights into the current investment landscape. They highlight the opportunity cost of remaining in cash, especially when bond yields are elevated, suggesting that fixed income can offer a stable income stream. Ken and Vincent emphasize a global multi-sector bond approach, which allows for diversification across various sectors, including government, corporate, and securitized debt, both in developed and emerging markets. This strategy is presented as a flexible solution that can adapt to market changes, offering potential for consistent income and risk mitigation.
Additionally, Ken and Vincent outline the benefits of a diversified income bond strategy, which aims to provide high yield-like returns with investment-grade risk levels. They leverage a broad fixed income universe, spanning multiple sectors and countries, to identify attractive opportunities and manage risks. The strategy's global nature avoids concentration in specific sectors or geographies, allowing for a diversified source of returns and income. Ken and Vincent suggest that this approach is well-suited to the current market environment, characterized by political uncertainty and fiscal challenges, and can help investors achieve stable returns and lower volatility through diversification.

What the reader can expect to Learn

  •  In recent years, the financial landscape has seen a significant shift, with cash being the preferred choice for many investors due to market uncertainties and elevated short-term interest rates. However, this strategy comes with an opportunity cost, as it may lead to missed opportunities for capital appreciation. As interest rates begin to decline from their peaks, the attractiveness of staying in cash diminishes, prompting a reevaluation of investment strategies. This is where fixed income, particularly bonds, comes into play as a compelling alternative. With bond yields remaining high compared to the post-financial crisis era, fixed income offers a chance to lock in attractive income levels.
  • The allure of fixed income lies not only in its income-generating potential but also in its ability to provide diversification across various sectors. A global multi-sector bond approach is particularly appealing in today's volatile markets. This strategy allows for investments across a wide range of sectors, including government, corporate, and securitized debt, both in developed and emerging markets. Such diversification can help mitigate risks and smooth out volatility, offering a stable return potential. The flexibility to adjust sector allocations in response to market conditions further enhances the appeal of this approach, making it a "one-stop shop" for investors seeking both income and diversification.
  • T. Rowe Price's Diversified Income Bond Strategy exemplifies this approach, aiming to deliver high yield-like returns with investment-grade levels of risk. By leveraging a broad fixed income universe, the strategy seeks to identify the most attractive opportunities across more than 15 major sectors, 80 countries, and 40 currencies. This global perspective allows for the pursuit of higher yields and better risk-adjusted returns while maintaining a controlled risk profile. The strategy's active management and robust risk controls are designed to minimize volatility and adapt to changing market conditions, providing a smoother investment experience.
  • In conclusion, as the market environment continues to evolve with political uncertainties, fiscal deficits, and geopolitical risks, the case for moving out of cash and into fixed income becomes stronger. A global multi-sector bond approach offers the potential to diversify return sources and achieve consistent income, making it an attractive option for investors looking to navigate the complexities of today's financial markets.
Kenneth A. Orchard, CFA Head, International Fixed Income Vincent Chung, CFA Portfolio Manager

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