Opportunities emerging in fixed income

18 September 2026, 12:44 UTC Chief Investment Office GWM Investment Research

Opportunities emerging in fixed income Opportunities emerging in fixed income Author: Sagar Khandelwal, Strategist, UBS Switzerland AG

• Why? 1) Fixed income offers attractive opportunities across regions and market segments. 2) Quality bonds can provide income, potential price gains if growth slows, and valuable portfolio diversification. 3) Combining high-quality bonds with selective emerging market exposure, rate-linked opportunities, and diversified income strategies can broaden sources of portfolio return.

• Why now? 1) The recent rise in yields has created Attractive yields across fixed income offer an tactical opportunities to add medium- to long-duration opportunity to secure income, strengthen diversification, exposure to high-quality bonds. 2) Emerging market and improve portfolio resilience. Source: Jason Leung_Unsplash bonds offer appealing yields and diversified return potential, while higher starting yields can help cushion the impact of market volatility. 3) For investors in lower- rate jurisdictions such as Switzerland, drawing income from a diversified range of sources remains especially important.

We view fixed income as Attractive, with opportunities attractive income, these securities may appreciate if tighter across regions and market segments. Emerging market monetary policy slows growth or reduces longer-term bonds offer appealing yields and diversified return potential. inflation expectations, leading yields to decline. In high-quality bonds, investors can consider adding exposure to the medium- to long-term maturity range, Investors should remain selective. We are more cautious where we believe yields provide income, potential price on the longest-dated bonds, given fiscal sustainability gains if growth slows, and portfolio diversification. concerns, growing AI-related debt issuance, and the potential for term premiums to remain elevated. In credit, Stronger investment grade issuers offer attractive carry stronger investment grade issuers offer attractive carry across medium maturities, in our view, while higher-risk across medium maturities. More income-focused investors credit should remain relatively short-dated. We are more may prefer shorter maturities to reduce sensitivity to cautious on the longest maturities given fiscal concerns and changes in interest rates. rising AI-related issuance. Investors should calibrate credit and duration risk to their objectives. For example, more Seek appealing income and diversification through income-focused investors may prefer shorter maturities to emerging market bonds reduce duration risk. In Switzerland, diversified income Emerging market credit remains one of the most compelling sources remain especially important. opportunities within global fixed income, in our view. The asset class offers attractive income, diversification benefits, Add medium- to long-duration high-quality bonds and increasingly resilient fundamentals. Many sovereign The recent rise in yields has created tactical opportunities borrowers have strengthened their external balances, while to add some duration in high-quality bonds. Medium- corporate issuers generally maintain conservative leverage to long-duration high-quality bonds have scope for price and solid earnings momentum. gains and can provide valuable diversification. Alongside

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

Opportunities emerging in fixed income

Relatively high all-in yields continue to support return with their overall currency strategy, using an appropriate mix potential, even though spreads are close to historically tight of currency-hedged funds, local bonds, and international levels. Emerging market bonds can therefore complement bonds. Diversifying across asset classes and income sources high-quality developed-market exposure and broaden the can help investors seek more durable income without relying drivers of portfolio income. But investors should remain excessively on any single market outcome. diversified and avoid overexposure to any single…