Thought leadership
Global Fixed Income Strategy Monthly Report
May 1, 2025
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Key takeaways
US growth scenarios
There are two possible scenarios for US growth: an orderly slowdown or a recession.
Interest rate outlook
The US interest rate outlook has been downgraded to neutral due to increased Treasury risk premia and domestic investor demand uncertainty.
Multiple factors pointing to a slowdown
Tariffs, fiscal and labor market policies, and global security dynamics are contributing to a slowdown.
Get an analysis of important drivers of global fixed income markets, including macroeconomic trends, interest rates, currencies, and credit, in our monthly global strategy report.
In our April report:
- Global macro strategy
After lowering our US growth projection last month, we’ve further downshifted our US growth outlook following the Trump administration’s April 2 “Liberation Day” tariff announcements. We currently see the possibility of two equally weighted scenarios, depending on how US trade policy shapes up — an orderly slowdown or a recession. - Interest rate outlook
US: We’ve have downgraded our US interest rate view to neutral. Several factors have raised the Treasury risk premium, including a potentially larger than expected budget deficit and uncertainty over the willingness of US domestic investors to buy Treasuries as foreign investors pull back on their demand.|
Europe: We’re positive on the European sovereign bond market, as the European Central Bank (ECB) is likely to continue lowering rates in anticipation of slower growth and inflation. - Currency outlook
US: We’re underweighting the US dollar against several currencies and anticipate that it will weaken further over time. We’ve upgraded our euro stance to overweight.
Europe: We expect European Union fiscal support and expansionary German fiscal policy to result in upward growth surprises relative to expectations, creating an environment conducive to euro strength over the medium term.
