Bond markets

18 September 2026, 09:25 UTC Chief Investment Office GWM Investment Research

Bond Theme Focus Bond markets Authors: Fabrice Schwarzmann, CFA, Analyst, UBS Switzerland AG; Thomas Wacker, CFA, Head CIO Credit, UBS Switzerland AG; Rochus Baumgartner, Co-Head CIO Credit, UBS Switzerland AG; Alexandra Bossert, CFA, Analyst, UBS Switzerland AG; Geoff Wan, CFA, Analyst, UBS AG London Branch; Chris Ptak, Analyst, UBS Switzerland AG

• We highlight key investment ideas linked to our Messages in Focus reflecting our views across regions, industries, and ratings.

• Investors interested in our Messages in Focus and thematic ideas can find specific bond baskets that are available in several currencies and are updated on a regular basis.

Overview of our Messages in Focus defensive and quality corporate bonds is complemented by Opportunities emerging in fixed income: We view fixed select lower-rated and subordinated instruments as satellite income as Attractive, with opportunities across regions and positions. market segments. Emerging market bonds offer appealing yields and diversified return potential, in our view. In high- Finally, investors seeking broader regional diversification and quality bonds, investors can consider adding exposure in the opportunities in mispriced risk premiums arising from home medium- to long-term maturity range, where we believe bias may benefit from our Cross-border bonds investment yields provide income, potential price gains if growth slows, theme. With credit spreads close to all-time lows, investors and portfolio diversification. Stronger investment grade can earn higher spread income by exploiting cross-currency issuers offer attractive carry across medium maturities, in our relative value opportunities in an issuer's bond structure and view, while higher-risk credit should remain relatively short- capturing the foreign issuer discount. dated. We are more cautious on the longest maturities given fiscal concerns and rising AI-related issuance. For related research and additional recommendations, please refer to our publications available on the CIO portal: In our Quality income investment theme, we identify attractive opportunities to lock in carry yields from • Quality income (18 September 2026) investment grade corporate bonds with medium tenors. While investors in economies with low interest rates may • Cross-border bonds (8 September 2026) not derive much income from quality bonds, they should • Conviction calls to put cash to work (12 August 2026) remember their portfolio diversification benefits in an adverse economic scenario. Investors can find opportunities • Bond Top List in our diversified bond baskets in USD, EUR, CHF, and GBP. • Bond Market Slides While we continue to see carry opportunities in corporate bonds, we believe investors looking to earn higher returns should maintain a selective and risk-aware approach. In our Selectivity matters investment theme, we provide bond baskets in USD, EUR, CHF, and GBP, where a core of

This report has been prepared by UBS Switzerland AG, UBS AG London Branch. Please see important disclaimers and disclosures at the end of the document.

Bond investment themes Quality income

We see a compelling opportunity to lock-in attractive However, at the portfolio level, riskier bonds tend to carry yields by investing in investment-grade (IG) correlate more closely with other risky assets, such as corporate bonds with medium-term maturities. These stocks, during market corrections. This is because the medium-tenor bonds not only provide solid carry yields benefit from declining rates can be outweighed by but also offer potential price gains. While we widening credit spreads. We therefore believe that, anticipate that central banks will deliver more hikes to particularly in uncertain times, the portfolio value of counter the inflationary effects of rising energy prices quality bonds is a key reason to hold them alongside and stronger-than-anticipated economic growth, we riskier assets. believe they will not hike as much as is currently priced into the bond market. From a pure base-case total- Thomas Wacker, CFA, Analyst return perspective, persistently tight credit spreads…