Fixed income: Key Convictions 1Q26

Western Asset’s 1Q26 Key Convictions (CIO Michael Buchanan, CFA) outlines a fixed-income playbook built around consistent income, selective risk-taking and positioning for AI- and M&A-linked issuance.

• Growth is expected to improve with disinflation intact; major central banks have already eased, supporting risk assets while yield curves steepen.

• With credit spreads tight, the focus shifts to high-quality spread sectors and careful underwriting as deregulation-driven M&A increases debt-funded deal risk.

• Attractive relative-value pockets include AI-related issuance, select CLO tranches, and commercial MBS, alongside EM local rates supported by high real yields.