Schroders Investment: Bond investment stance can shift to defensive, optimistic about short-term high-quality corporate bonds and agency mortgage-backed securities

According to the Zhitong Finance APP, Julien Houdain, Head of Global Unconstrained Fixed Income Investment at Schroders, stated that the recent pause in hiring and layoffs by U.S. companies has prompted the Federal Reserve to ease its monetary policy. However, with economic growth remaining robust and profitability staying strong, it is expected that the local labor market will stabilize rather than deteriorate sharply. In light of this, Julien believes that the stance on bond investments can shift to a defensive position, thus favoring U.S. Treasuries, high-quality corporate bonds with maturities of no more than five years, and Agency Mortgage-Backed Securities (Agency MBS), the latter of which is backed by the U.S. government and carries a default risk similar to that of U.S. Treasuries.

As we enter the last quarter of 2025, the health of the U.S. economy remains a major focus for global markets. The likelihood of an economic "soft landing" is highest, characterized by a slowdown in economic growth and easing inflationary pressures, but with rising downside risks, the Federal Reserve's current dual mandate is to promote full employment and stabilize prices.

He added, "U.S. economic growth remains robust, and market uncertainties are diminishing. Therefore, we are currently not worried about the U.S. economy falling into recession, but as the local labor market cools, this provides ample justification for the Federal Reserve to ease monetary policy based on its dual mandate."

Regarding Europe, Julien noted that there are differences in economic prospects among various countries in the region, and he is slightly optimistic about European corporate bonds. However, he emphasized the need to carefully select opportunities, as the issuance of certain logistics and data centers remains favorable.

Given that sovereign bond yields are currently not attractive, the fund primarily invests in high-quality global corporate bonds. As of September 30, 2025, the fund's average credit quality remains at an investment-grade level of BBB+.

In addition to developed countries such as Europe, the U.S., and the U.K., due to less hawkish monetary policies, a moderate allocation to emerging market bonds can also enhance the yield of the bond portfolio. This approach allows for a more diversified asset allocation from a global investment perspective, making it more resilient