Monthly Bond Commentary - January 2026

After an arduous process President Trump has nominated former Federal Reserve Governor Kevin Warsh to take on the reigns of the Fed in May; when Jerome Powell's term ends. We anticipate an initially dovish Warsh to take the helm but his hawkish past moderates fears of Trump interfering materially with the central bank's independence for the time being. We can therefore anticipate looser monetary policy and lower interest rates in the short-term; a boon for bonds. Credit typically outperforms government bonds in easier monetary environments (outside of recessions) as pressure on consumers and customers is eased. Therefore, notwithstanding a left-tail economic shock we believe the outlook for credit markets is very positive for the coming year.

January demonstrated the bid for credit has not yet reached its peak as $300bn of Corporate bonds were issued. This is the most on record for any January and the pace has not slowed down in February as technology firms have begun to flood the market with highly-rated, long-dated debt as capex spending plans continue to balloon. Despite the significant debt issuance credit quality remains very strong for the largest American tech firms - with yields reflecting this we do not see suitable opportunities in this space.