Fixed income

Stay active, stay diversified for global fixed income alpha

December 09, 2025 - 3 min

Kevin Charleston
CEO
Loomis Sayles

Eric Franc
CEO
DNCA Investments

Olivier Houix
CEO
Ostrum Asset Management

With a murky global economic picture, and questions of AI valuations bubbling through investors’ minds, it was the perfect time for our global fixed income panel at the Natixis Investment Managers’ Japan CEO Symposium to bring some clarity and perspective. While our panel agreed there is considerable cause for caution in today’s environment, they also believe there are plenty of opportunities to gain risk-adjusted alpha around the globe.

A mixed global macroeconomic picture

Our panelists raised concerns about AI valuations, and whether the US Federal Reserve would be able to maintain its independence given the ongoing pressure it is under from President Trump, however they were not overly concerned with the US economy. On the contrary Kevin Charleston, CEO of Loomis Sayles, is bullish about its prospects saying: “the profit cycle in the US remains very strong and corporate profits remain really solid. As a result, it creates a very stable labour market.” He is calling this the "no fire, no hire" period and believes that while President Trump’s tariffs have caused considerable volatility, the “big beautiful bill is overall net stimulative”.

Eric Franc, CEO of DNCA Investments, was less effusive. While he doesn’t believe there will be a “full-blown recession” in the US he thinks there is a high risk of stagflation with lower growth and inflation still lingering.

Across the Atlantic, Olivier Houix, CEO of Ostrum Asset Management is concerned about the momentum of the European economy, citing weak demand and too-high household savings. He attributes this to Europe’s key growth driver, German exports to China, having declined for almost three years. And despite the German government launching the “German equivalent of Joe Biden's Inflation Reduction Act”, investing 500 billion euros over 10 years, he expects European economic growth to remain weak. Houix is also concerned about European inflation due to higher-than-expected wages growth, and fears inflation may remain above 2%. He saves his deepest worries for France however, saying that with its high public debt and tense political situation its economy is now more comparable to Italy and Spain, than to Germany.

Diverse opportunities across the globe

The panel was positive about global fixed income opportunities however. Kevin Charleston highlighted the change to US rates in recent years: “I think the key positive in the bond market is just the absolute level of rates right now, with a 4% US 10-year treasury. That’s a dramatic increase compared to what we experienced pre-COVID.” For specific opportunities, Charleston likes US Treasury Inflation Protected Securities (TIPS) as well as securitised credit and, despite recent concerns, data centres: “When we look at the underlying businesses that stand behind a lot of the financing for data centre construction, you have massive free cash flow generators. Usually, when you’re in a late cycle, capital expenditures will exceed cash flow, but we don't see that right now. We continue to see a positive variance, and we consider that to still be a pretty good opportunity for us”

Olivier Houix thinks 2026 is likely to be positive for European credit markets and expects further significant inflows in this asset class, commenting that: “Despite relatively tight spreads, the level of yields remains attractive, fundamental rates are solid, defaults are below average, and leverage is under control.”

DNCA’s Eric Franc believes inflation is now structural and will be higher for longer in the future. Which is why he favours real rates (interest rates which are adjusted for inflation) and exposure to inflation breakevens in developed economies like the US, New Zealand, Spain and Italy. He sees opportunity in emerging market debt in countries such as South Africa, Mexico, Romania & Chile, but in USD and Euro to avoid currency risk. He is also keeping an eye on G10 long-term nominal rates, and favours countries like the UK, Australia, New Zealand, and Japan: “because most of the yield curves are steep, and due to the recent increase in long-term yields.” Franc believes Japan in particular offers many opportunities, with its yield curve one of the steepest among the G10 countries and sovereign bond yields higher than they have been for 25 years.

While Franc named a wealth of opportunities around the globe he emphasised the uncertain nature of the global economy, and the need to be selective and remain flexible and diversified for the best opportunity to gain attractive risk-adjusted returns in coming years.

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