From Anders Persson, Chief Investment Officer, Head of Global Fixed Income at Nuveen, regarding the latest fixed income insights from Nuveen’s 2025 Global Investment Committee midyear outlook.
Key findings:
- Securitised assets and preferred securities offer a compelling combination of attractive yields and value.
- For municipal bonds, we favor water/sewer bonds and select opportunities in health care and higher education.
Investment positioning
As with all parts of the global financial markets, bonds have experienced increased volatility in 2025 amid rising policy uncertainty. Nevertheless, we think yields overall offer a compelling entry point and believe the fundamental credit picture remains positive for fixed income investments.
Long-term rates will likely remain volatile over the next few quarters, then slowly decline amid weaker economic growth and potential Fed rate cuts later in the year. We encourage investors to take advantage of bouts of volatility amid policy shifts and a slowing economy using broad diversification and active management. Also, we continue to find attractive opportunities within credit and expect duration will reassume its role as a growth hedge going forward.
Also read: Taking a Measured Approach With High Yield Bonds
We remain positive toward senior loans, which offer compelling yields, but the likelihood of slowly moderating rates does warrant more caution when considering floating rate instruments. In contrast, we are more positive on preferred securities, which benefit from a strong issuer base and appear attractively valued. We also are constructive on securitised assets (especially mortgage related investments that offer attractive yields and solid credit risks) and high yield (spreads are tighter but yields and fundamentals remain solid). We are less positive on investment grade corporate bonds (relatively tight spreads and a longer duration profile than we prefer).
Municipal bonds remain one of the most-preferred areas of the market, and we believe prices have become dislocated from fundamentals. State and local governments remain resilient, and the market features attractive supply/ demand dynamics. Given that municipal bonds have been lagging the broader fixed income market this year, we think munis are essentially on sale.
Private credit markets remain constructive, and we generally prefer more defensive and higher-quality areas. Market growth has slowed but remains positive.
