Fixed Income Outlook 3Q25

Key Takeaways:

1. Despite heightened economic uncertainty in the second quarter, bond markets remained resilient. Investment grade bond returns were largely positive across maturities as falling credit spreads offset rate increases.
2. The yield curve retained its unusual “U” shape as long-term rates rose on inflation concerns while short-term rates remain anchored by Fed policy.
3. The Fed remained in a “wait and see” approach, as stable inflation and continued labor market strength is offset by the uncertain impact of several of the Trump administration’s fiscal policies.
4. We continue to believe fixed income offers a compelling opportunity for investors, as bond yields remain attractive with ample liquidity in high-quality issues.