Global Fixed Income Has Entered a Dispersion Phase

Global fixed income has entered a new phase — and it is no longer about broad directional bets. The latest MidLincoln Global Fixed Income Strategy – Sharper Conviction argues that we are now operating in a dispersion market. Yields are no longer moving in sync. Developed markets are repricing higher, segments of Emerging Markets are stabilising, and sector spreads are rotating. In this environment, allocation discipline matters more than macro headlines.

In Developed Markets, recent yield moves in core Europe — particularly Germany and Switzerland — signal renewed short-term duration pressure. Long-end volatility remains elevated, and convexity risk is poorly compensated. Our strategy therefore leans neutral-to-short duration in Europe and avoids concentrated long-end exposure. Instead, we prefer intermediate positioning where carry remains attractive without excessive volatility risk.

The U.S. Treasury belly remains the anchor. Rather than chasing long-end rallies or reacting to daily data swings, we favour roll-down and intermediate duration exposure as the more efficient way to express rate views. The key message from the data: stay flexible, but do not overextend duration in an environment where volatility is still driving outsized moves.

Emerging Markets present a different story — one of growing dispersion and selective opportunity. Several sovereigns are tightening, with yields still comfortably above 6%, creating compelling carry where momentum is improving. At the same time, other countries are widening, reinforcing the importance of country-level selection. Broad EM beta exposure is no longer sufficient. The report outlines where selective overweight positions are justified — and where caution is warranted.

Hard-currency EM remains our preferred implementation, particularly where spreads are compressing rather than expanding. Local currency allocations remain tactical and FX-aware. Returns in local markets are not just about yields — they are joint bets on rates and currency. In a volatile global backdrop, currency risk must be intentional, not incidental.

Sector rotation is another defining feature of the current environment. Energy and Utilities spreads are tightening, signalling stable cash flows and defensive carry demand. In contrast, Technology and Transportation spreads are widening, reflecting growth sensitivity and risk repricing. This divergence supports a clear tilt toward defensive sectors over cyclical spread beta.

Frontier markets continue to offer eye-catching yields — but the report stresses discipline. Large weekly tightening moves may present tactical opportunities, yet liquidity conditions and position sizing are paramount. Frontier allocation is not a core holding; it is a risk-budgeted sleeve designed to enhance carry while maintaining strict exit rules.

The overarching conclusion is straightforward: stay invested, but stay selective. Conviction now comes from structure — duration control, sector discipline, country-level EM selection, and careful risk budgeting in frontier exposures. Yield is available, but it must be earned intelligently. The full report details the data, charts, and allocation framework supporting these views. (view report)