Sep 21, 2026 · 30 min
Fixed-income strategists find value beyond rising Treasury yields
CIO Fixed Income Roundtable Podcast Series
The discussion shows how investors are weighing higher income against rate, credit, leverage, and municipal-market risks.
- 1High-yield bonds look more attractive as higher yields and shorter duration improve entry points.
- 2Investment-grade corporates offer income and potential duration benefits if Treasury yields stabilize or decline.
- 3Preferreds, leveraged closed-end funds, and municipal bonds carry distinct risks despite their income potential.
Don't miss
The panel shifts high-yield bonds from a neutral to an attractive view, citing cheaper entry points, higher yields, and shorter duration.
The brief
UBS fixed-income strategists revisit the latest Federal Reserve decision, a 25-basis-point hike, and the sharp rise in Treasury yields that reshaped market sentiment.
The panel’s central tension is whether higher rates are chiefly a risk or an opportunity: it favors selective interest-rate exposure while acknowledging difficult timing.
High-yield bonds move from neutral to attractive as cheaper entry points, higher Treasury yields, robust credit flows, and relatively short duration support the case.
Investment-grade corporates offer coupon income and potential total-return support if yields stabilize or fall, while expected debt supply and capital spending complicate the outlook.
Municipal bonds have weakened under heavy issuance, softer technical conditions, and tax-related selling, leaving coupon income to offset some pressure on returns.
The roundtable closes by positioning near a 5% 10-year Treasury yield, with preferreds and investment-grade corporates facing rate-driven headwinds despite supportive spread characteristics.
What was said on this episode
19 statements · 15 positive · 2 negative · 2 neutral
The absolute peak in Treasury yields cannot be timed reliably.
“it's impossible to call the absolute top and tender treasury yields”
Listen at 10:49
Compounding income buffers fixed-income portfolios against potential price depreciation.
“that compound income that you're earning just offers an incredible amount of buffer to potential price depreciation”
Listen at 11:07
Any Treasury rate decline is unlikely to be sustainable.
“if, in fact, we retire rates, we don't think it's going to be sustainable”
Listen at 11:21
Compounding income will be the main driver of total returns.
“that compounding income is going to be the real tailwind of total return”
Listen at 11:27
Leveraged preferred closed-end funds pay nearly 9.5% on average.
“They are, in fact, paying almost 9.5% on average.”
Listen at 12:05
Fixed-rate leverage makes preferred-fund distributions more stable during rising rates.
“the distributions paid out by preferred funds tend to be a lot more stable and not get as much negative impact from rising rates”
Listen at 12:36
Covered preferred closed-end funds trade at unusually cheap discounts.
“these discounts, when you look at 52-week or two-year average, they are cheapest at this point”
Listen at 12:51
Preferred closed-end funds make sense for investors in higher tax brackets.
“these definitely make sense for people who are in the higher income tax bracket”
Listen at 13:21
Investment-grade corporate returns will be driven by yield and coupon income.
“the outlook ahead will be driven by the yield, the coupon”
Listen at 18:43
The investment-grade corporate index yield is currently 5.75%.
“The IG index yield is currently 5.75%.”
Listen at 18:48
One-to-three-year investment-grade bonds yield 5.1%.
“one to three-year IG is yielding 5.1%”
Listen at 19:03
Seven-to-ten-year AAA investment-grade bonds yield 6% on average.
“seven to 10-year triple Vs. on average, do yield 6%”
Listen at 19:16
Greater clarity on Fed policy should reduce pressure on long-term yields.
“we think that the bit more clarity that we're getting about Fed policy as it evolves should maybe take some pressure, particularly off the long end”
Listen at 19:32
Greater rate stability should benefit investment-grade corporate bonds.
“that should bode well for the IG asset class”
Listen at 20:14
Investment-grade spreads are not expected to move materially.
“I'm not expecting to see spreads materially move in one way or another”
Listen at 21:03
Investment-grade spreads will probably remain near historic lows.
“probably stay, you know, near these historic tights”
Listen at 21:08
High-quality hyperscaler debt issuance will be roughly similar next year.
“we're kind of expecting a similar amount next year”
Listen at 22:17
The market should readily absorb high-quality hyperscaler debt issuance.
“we think that should be easily digested by the market”
Listen at 22:19
The market has adjusted to higher corporate debt supply.
“the market has sort of adjusted, now adjusted that higher supply in our opinion”
Listen at 23:47
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.