H1 2025 Market Review & Outlook
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Focused on: Fixed Income

H1 2025 Market Review & Outlook - Fixed Income
Key Takeaways
  • Soft Landing in Sight – Inflation is cooling and growth is slowing, setting the stage for potential rate cuts without a deep recession.
  • Canadian Bonds Outperform – Canada’s earlier and deeper rate cuts have supported bond performance relative to the U.S.
  • Curve Steepening Ahead – As central banks shift to easing, long-term yields may rise, creating opportunities in curve positioning.
  • Selective Credit Exposure – The team remains cautious on high yield and is focusing on investment-grade and structured credit opportunities.

As policy rates begin to fall and credit conditions evolve, Mark and Etienne share how they’re tactically managing duration, sector exposure, and credit risk to protect capital and pursue strong risk-adjusted returns in the second half of the year.

Key Topics Covered:

  • Easing Inflation & Cooling Growth – The U.S. economy continues to slow, led by weaker job growth and declining inflation pressures.
  • Shifting Rate Expectations – Markets now anticipate more rate cuts from the Fed and Bank of Canada, driving volatility across curves.
  • Credit Differentiation – Investment grade remains stable, while high yield and private credit face greater headwinds.
  • Strategic Positioning – We've increased duration and trimmed riskier credit exposure while adding selectively to structured credit opportunities.
  • Outlook for 2025 – Expect continued dispersion across credit markets, with opportunities in senior loans, select structured credit, and long-term rate exposure.

Historical Commentary

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  • Ninepoint Fixed Income Outlook
    In this month’s update, Etienne Bordeleau, Vice President & Portfolio Manager at Ninepoint Partners previews the key themes from our upcoming monthly written commentary, were he discusses the mid-year review of fixed income markets, focusing on interest rate dynamics, yield curve analysis, credit market performance, and currency trends. He highlights the underperformance of the Canadian bond market compared to the U.S. and the implications of the trade war on economic growth and inflation. The discussion emphasizes a cautious approach to credit risk and the potential for further weakness in the U.S. dollar.
    Fixed Income
    Credit
  • Ninepoint Fixed Income Strategy
    As we have now reached the midpoint of the year, we thought we could take stock of what has happened, before reflecting on what could happen in the second half. The table below shows the year-to-date change in some of the key variables impacting North American fixed income investors.
    Fixed Income
  • Ninepoint Fixed Income Strategy
    After weeks of promotion, we were expecting the tariff announcements on April 2nd “Liberation Day” to be somewhat substantial. We, and the rest of the world, were shocked by the magnitude and breadth of the tariffs announced. Not only were the tariffs calculated in a very unorthodox fashion, pretty much every country on earth was included, even some uninhabited islands.
    Fixed Income
  • Ninepoint Fixed Income Outlook
    In this month's video preview for the May Fixed Income Commentary, Etienne Bordeleau, Vice President & Portfolio Manager at Ninepoint Partners, previews the key themes from our upcoming monthly written commentary, focusing on the ongoing U.S.-led trade war, rising global policy instability, and what it all means for inflation, interest rates, and portfolio positioning.
    Fixed Income
    Credit
  • Ninepoint Fixed Income Strategy
    After weeks of promotion, we were expecting the tariff announcements on April 2nd “Liberation Day” to be somewhat substantial. We, and the rest of the world, were shocked by the magnitude and breadth of the tariffs announced. Not only were the tariffs calculated in a very unorthodox fashion, pretty much every country on earth was included, even some uninhabited islands.
    Fixed Income
  • Ninepoint Fixed Income Outlook
    In this month's video preview for the April Fixed Income Commentary, Etienne Bordeleau, Vice President & Portfolio Manager at Ninepoint Partners, unpacks the market’s dramatic reaction to U.S. "Liberation Day" tariffs, the global implications for Treasury yields and investor sentiment, and how Ninepoint is positioning amid a fractured credit market.
    Fixed Income
    Credit
  • Ninepoint Fixed Income Strategy
    The Trump Trade War is now global, with tariffs on a multitude of products and countries, taking the U.S.’s average tariff rate to a level last seen in the 1930s (Figure 1 below). Back then, the Smoot-Hawley Tariff Act significantly raised duties on imported goods, and is broadly associated with a worsening of the Great Depression. The big difference then was that imports of goods were only about 2% of GDP, not 10%! As of the time of writing, we expect the overall U.S. tariff rate to increase to roughly 18-22%, but escalation could bring it even higher.
    Fixed Income
  • Ninepoint Fixed Income Strategy
    While still feeling the effects of the largest rate hike cycle since the 1980s, the global economy finished 2024 in a vulnerable state. In response, by mid-year, central banks started cutting rates, hoping to revive demand and investment. Unfortunately, the world is now faced with another negative shock: Trump and his love of trade wars.
    Fixed Income
  • Ninepoint Fixed Income Strategy
    While still feeling the effects of the largest rate hike cycle since the 1980s, the global economy finished 2024 in a vulnerable state. In response, by mid-year, central banks started cutting rates, hoping to revive demand and investment. Unfortunately, the world is now faced with another negative shock: Trump and his love of trade wars.
    Fixed Income
  • Ninepoint Fixed Income Strategy
    2024 saw the end of the hiking cycle in Canada, the U.S. and Europe. Central banks were on hold for most of the first half and started cutting rates in June after several months on hold, encouraged by lower headline and core inflation.
    Fixed Income
  • Ninepoint Fixed Income Strategy
    Now that the dust has settled following the U.S. presidential election, market participants are cautiously looking ahead to 2025. In Canada, we continue to see a deterioration in the labour market, with the unemployment rate now at 6.8% and rising (Figure 1 below). GDP growth is also disappointing, with only 1% growth in the third quarter. With this much slack in employment and the economy operating well below potential, we expect the Bank of Canada to continue cutting rates at a brisk pace.
    Fixed Income
  • Ninepoint Fixed Income Strategy
    A lot has happened since our last commentary. Global growth (excluding the U.S.) continues to slow, prompting central banks around the world to loosen monetary policy (China, UK, Sweden, ECB, Canada and the Fed all cut rates this past month).
    Fixed Income