The Weekly Fix

Where did the riskiest borrowers in credit actually go?

Anne Greenwood, Institutional Portfolio Manager on the BlueBay U.S. Fixed Income team, unpacks how credit risk is migrating—and why the high yield label no longer tells the whole story.

• The high yield market has grown higher in quality, yet risk hasn't disappeared—it's moved.
• Much of it has migrated into leveraged loans and private credit over the past decade.
• The AI and data center buildout is bringing stronger balance sheets and new backstops into parts of high yield.

When the market beneath the index changes, the index alone is no longer enough.

What happens when the unemployment rate falls even as jobs disappear?

Mindy Gudmundson, Institutional Portfolio Manager on RBC GAM’s BlueBay U.S. Fixed Income team, unpacks a week of mixed market signals and what they reveal about the labor market beneath the headlines.

• Job losses concentrated in consumer-facing sectors hint at a cooling labor market
• A falling unemployment rate reflects workers leaving the workforce, not underlying strength
• The Fed's new chair is letting data, not commentary, steer policy

It's a week where the numbers told two very different stories, and the gap between them is where the real insight lives.

What happens when a divided Fed meets a bond market that's doing its own thing?

Laurie Mount, Portfolio Manager with RBC BlueBay's US Fixed Income team, breaks down the latest Federal Open Market Committee decision and what it means for your cash strategy.

• A split committee with growing dissent among voting members
• The long end of the Treasury curve is telling a very different story
• Why staying liquid matters more than ever right now

With conflicting signals from the Fed and geopolitical tensions adding pressure, staying nimble has become the defining move for cash investors today.

What happens when the race to build AI infrastructure meets the realities of credit markets?

Andrzej Skiba, Head of BlueBay U.S. Fixed Income at RBC GAM, breaks it down in this week's episode.

• The AI buildout is reshaping how credit markets work.
• Debt issuance is climbing as companies finance the expansion.
• In-depth credit underwriting is what separates the strongest opportunities from the rest.

When capital needs surge and equity issuance doesn't keep pace, debt markets carry the load-and that's exactly what's playing out right now. It's a moment that rewards careful, selective thinking.

Record asset-backed securities (ABS) issuance. Spreads at year-to-date tights. But underneath, a bifurcated consumer is quietly narrowing the margin for error.

Teri Savage, Senior Trader on RBC GAM's BlueBay U.S. Fixed Income team, breaks down what's driving the ABS market's record pace, and why security selection has never mattered more.

• ABS gross issuance is on pace for a record year, fueled by funding costs, diversification needs, consumer debt growth, and new sectors entering the market - yet spreads now sit at year-to-date tights across most subsectors.
• The consumer is holding up overall, but the picture is bifurcated: stress is concentrated in subprime borrowers, and while early-stage delinquencies remain below pre-pandemic levels, they're expected to rise gradually as higher rates increase pressure.
• With spreads historically stretched and the wiggle room for error narrowed, risks span geopolitical, technical, and fundamental factors — making credit tiering and active security selection increasingly critical for ABS investors.

Tight spreads don't tell the whole story. The most compelling opportunities in US credit right now may be hiding in plain sight.

Anne Greenwood, Institutional Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, breaks down why the U.S. high yield market's quiet quality transformation is creating real opportunity for active managers - just as the AI trade begins to test investor appetite.

• The AI tailwind in corporate bonds may be waning, and that changes the question investors need to be asking.
• BB-rated bonds now make up roughly half the US high yield index, up from a third pre-2010, while the riskiest borrowing has migrated to leveraged loans and private credit.
• High yield spreads at ~270bps look tight versus a 500bps+ historical average, but index-level data masks significant dispersion - and that's exactly where active managers can add value.

Fed hikes may be overpriced, but yields stay supported by AI-driven growth. IG carry remains strong as record supply tests spreads.

• The Treasury curve is expected to steepen in the second half of 2026: front-end yields may ease as oil-driven inflation pressure subsides and markets have potentially priced in too many Fed hikes under Chair Warsh's data-dependent regime, while robust AI-related investment and productivity-driven growth should keep yields stable to slightly higher at the 10-year and beyond.
• Investment grade credit spreads remain tight — index OAS at 74 basis points with a yield-to-worst of 5.22% — yet strong company fundamentals and yield-based demand have absorbed the heaviest supply environment in years, with US IG gross issuance already crossing $1.26 trillion year-to-date, matching the record pace set in 2020, and July alone forecasted to bring approximately $130 billion in new supply — the busiest July in a decade.
• Technology and data center bonds have become the defining theme in IG credit for 2026: hyperscalers are expected to borrow as much as $190 billion in the bond market this year alone, and while the team sees this pace continuing, they are building exposure selectively — targeting wider spread entry points among the highest-quality issuers while remaining overweight banks, defensive sectors, corporate hybrids, and insurance, and largely avoiding deep cyclicals and BDC bonds.

The Federal Reserve's pivot under new leadership is reshaping the fixed income landscape, and investors need to be ready.

Laurie Mount, Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, breaks down what changed at the Fed's latest meeting and how investors should think about navigating this shift.

• Warsh's first meeting as Fed chair delivered a hawkish surprise, with officials now projecting higher rates through 2027 and markets pricing in a rate hike as soon as September.
• The Fed pulled back on guidance and moved to discretionary bond purchases, creating less certainty about future moves and more potential volatility in short-term Treasury yields.
• While a potential US-Iran deal has pushed gas prices below $4 for the first time since March, tight spreads and lingering inflation pressures still call for caution in this environment.

The Fed's dual mandate faces unique challenges as artificial intelligence (AI) adoption creates new uncertainty around employment and rate trajectory.

Tim Leary, Senior Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, examines how AI-driven economic transformation is reshaping the outlook for rates and credit markets.

• Strong fundamentals support elevated rates - US gross domestic product (GDP) growth fueled by AI capex, low unemployment, solid corporate earnings, and consumer cash balances higher than pre-COVID levels across all income bands (even after adjusting for inflation).
• AI adoption uncertainty is the critical unknown - The Fed's dual mandate of full employment and price stability will inevitably be tested as AI reshapes the job market, creating unpredictability in both economic direction and rate trajectory.
• High yield offers a potentially compelling income opportunity - With rates elevated and portfolios shorter in duration, investors are increasingly attracted to the steady cash flow that high yield can provide in today's environment.

Capital formation replaces innovation as AI's next frontier: a new $85B raise and $1.5 trillion financing gap signal that hyperscaler balance sheets alone cannot fund the infrastructure buildout, forcing debt into utilities, private credit, and securitized markets.

Anne Greenwood, Institutional Portfolio Manager on RBC GAM's BlueBay U.S. Fixed Income team, examines how AI is transitioning from a technology story to a capital markets story, and why this shift matters for fixed income investors navigating the next phase of infrastructure financing.

• AI's capital requirements now exceed what even the most profitable tech companies can self-fund, forcing a migration into investment-grade bonds, utility debt, infrastructure finance, and private credit markets.
• A major technology company’s $85B equity raise signals a fundamental shift where access to capital becomes as critical as access to technology, echoing historical patterns from railroads to fiber networks.
• Fixed income investors face a critical question: will AI monetization arrive fast enough to prevent an overleveraged ecosystem, or are we witnessing the early stages of a new infrastructure debt regime?