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JUNE 2026 WEBCAST FIXEDINCOME US FEATURING IN FOCUS

The Resilience of US Credit In brief ■ Credit fundamentals remain resilient, but the margin for error has narrowed ■ Policy uncertainty is rising as Federal Reserve communication and transparency decline Alex Mackey, CFA Co-CIO, Fixed Income ■ Collaboration, consistency, and conviction provide a disciplined framework across cycles Fixed income is entering a more complex phase. Credit markets remain well supported by solid fundamentals, healthy income, and steady demand. However, a shift in the Federal Reserve’s workings, alongside structural forces such as the AI investment cycle, is introducing fresh uncertainty. The challenge, as we see it, is how to navigate a market where credit stability sits beside a less predictable policy backdrop and a narrower margin for error on valuations. Benoit Anne Senior Marketing Director, Policy uncertainty is reshaping rates markets Head of Marketing Insights A subtle but meaningful shift is underway in monetary policy. We believe reduced central bank communication and a less explicit framing of inflation targeting are weakening the anchors that have historically dampened rate volatility. The likelihood of policy surprises is rising, and with it, the difficulty of holding high-conviction duration views. In this environment, we think duration is no longer a straightforward macro expression. Instead, it requires a more tactical, flexible approach where precision matters more than direction.

Tight credit spreads reflect strength, not complacency At first glance, today’s spreads leave little room for error. Look closer, however, and we believe the backdrop is more constructive than valuations alone might suggest. Corporate fundamentals are resilient, earnings growth is steady, and the starting point for yields offers a meaningful cushion to total returns. Technicals are equally supportive, with consistent demand and balanced positioning. The structure of the market has also evolved; the US high yield bond market today contains a higher share of better-quality issuers than in the past, which in our view lowers aggregate default risk. Seen in this light, tight spreads are less a sign of complacency than a rational reflection of a stronger asset class. We would caution against expecting a sharp, valuation-driven correction.

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The Resilience of US Credit US FIXEDINCOME IN FOCUS

AI is driving both opportunity and risk in credit The surge in AI-related capital expenditure is one of the most significant forces shaping credit markets today. So far, strong investor appetite supported by attractive yields has comfortably absorbed this supply. We see the broader economic impact as being constructive, with capital spending feeding through to growth and reinforcing corporate fundamentals. That said, the balance between supply and demand bears close watching, and we remain alert to any inflection point at which issuance begins to outpace appetite.

From beta to alpha as the driver of returns With spreads tight and macro opportunities less compelling, we believe the drivers of return are changing. Broad market exposure is no longer enough; returns increasingly depend on differentiated security selection, relative value, and a tilt toward quality. Opportunities remain, but in our view, they are more dispersed and idiosyncratic. This reinforces the case for active management, where the ability to identify and adapt becomes a primary source of value.

Where we see risks and opportunities today On the risk side, we are most cautious on high yield, particularly European high yield and the lower-quality segments of the US high-yield market where we believe valuations offer the least compensation for the risks involved. By contrast, we see relative value in higher-quality investment- grade credit. Within emerging markets, we prefer sovereigns over corporates for liquidity reasons. On the opportunity side, our conviction is more measured. There are always opportunities within and across fixed income sectors, but in this market, we believe differentiated returns will come from a combination of idiosyncratic security…