Article bmfimultisectorplaybookincreasingdispersion ltr

Broad Markets Fixed Income Multi-Sector Playbook

A World of Increasing Dispersion OUTLOOK | BROAD MARKETS FIXED INCOME | Mid-Year 2026

The defining feature of today’s investment environment is no AUTHORS

longer simply higher interest rates, but increasing dispersion across countries, industries and issuers. While global growth has VISHAL KHANDUJA remained resilient despite elevated rates, inflation uncertainty Head of Broad Markets Fixed Income and geopolitical tensions, the underlying drivers of growth are becoming less synchronized. Fiscal capacity differs dramatically across countries, AI adoption is creating clear winners and losers MICHAEL ROSBOROUGH and trade policy is reshaping supply chains and capital flows. Head of Macro

The result is a world where economic and market outcomes are UTKARSH SHARMA Head of Global becoming increasingly differentiated, creating both opportunities Aggregate and and risks for active investors. Global Multi-Sector Portfolio Manager

Monetary policy increasingly reflects this dispersion. The era of coordinated central bank actions appears behind us, as policymakers respond to different LEON GRENYER inflation pressures, growth trajectories, labor-market conditions and fiscal Head of European realities. Some economies continue to confront persistent inflation and Multi-Sector

resilient demand, while others face slowing growth and greater pressure to BRIAN ELLIS Senior U.S. Multi- ease. Central bank divergence is becoming a structural feature of markets Sector Portfolio rather than a cyclical anomaly. Manager and Co-Head of Short Maturity The same forces are even more evident within credit markets. Corporate fundamentals remain broadly healthy, but the gap between winners and losers continues to widen. AI-related investment in technology, utilities, power infrastructure and data centers is driving substantial capital needs and debt issuance, while technological disruption is challenging established business models across numerous industries. With broad credit spreads already near historically tight levels, dispersion matters more than ever. We believe the opportunity is less about capturing further spread compression and more about identifying future winners while avoiding future losers.

Higher starting yields remain one of the most compelling opportunities for fixed income investors. After more than a decade of exceptionally low rates, investors can once again earn attractive levels of income without reaching excessively far down the quality spectrum. Real yields are also near

the high end of their post-Global Financial Crisis range, emphasizing durable business models, stronger balance making valuations attractive not only from an all-in yield sheets and sectors where investors are being adequately perspective, but also on a real-yield basis. The return of compensated for risk. Higher-quality fixed income, securitized meaningful fixed income inflows reflects this reality, as assets and carefully selected credit exposures provide the investors increasingly recognize that income and carry, rather opportunity to earn attractive income while remaining than spread compression, are likely to drive a larger share of resilient across a wide range of economic outcomes. In a future returns. world where carry is abundant but spread compression potential is limited, success may depend less on reaching Demand for high-quality fixed income has also remained for additional yield and more on preserving capital, avoiding exceptionally strong. Yield buyers continue to be drawn to deteriorating credits, rotating dynamically across sectors and the asset class by attractive income, while many investors countries and allowing income to compound over time. remain historically under-allocated to fixed income after years of low yields and strong equity-market performance. Key themes for second half 2026 At the same time, the scale of equity gains over the past „ Increasing macroeconomic dispersion is driving greater several years has created a natural rebalancing impulse differentiation across countries, interest-rate markets, back toward bonds. These flows have helped support high- currencies, industries and issuers.…