The Weekly Fix

The Fed’s rate cut is in, just as the market expected – what’s next for the future of monetary policy?

Laurie Mount, Portfolio Manager with RBC BlueBay’s U.S. Fixed Income team, unpacks the Federal Reserve’s latest rate cut, economic projections, and what it all means for investors.

• The Fed cut rates by 25 basis points, lowering the target range to 4.00–4.25%, with projections showing stronger growth, higher inflation, and lower unemployment through 2026–27.
• Diverging views among FOMC members reveal uncertainty, with projections ranging from no more cuts to a 100-basis point reduction by year-end 2025.
• Chair Powell described the cut as a risk management move, emphasizing a data-dependent approach amid shifting risks to labor markets and inflation.

Can Fed policy ease the housing affordability crisis?

Teri Savage, Senior Mortgage Trader with RBC BlueBay’s Fixed Income team, explores the pressures on the U.S. housing market and the potential impact of upcoming policy changes.

• Home prices continue to outpace income growth, while 30-year mortgage rates remain stubbornly above 6%, pushing affordability to record lows.
• The Federal Reserve is expected to cut the Fed funds rate, which could drive down Treasury yields and, in turn, lower mortgage rates to help ease affordability pressures.
• Mortgage investors should remain flexible and closely monitor policy developments, as the administration prioritizes lowering rates to address housing market challenges.

Understand how these dynamics could shape the housing market and investment strategies.

Senior portfolio manager Tim Leary discusses how weaker job growth and strong bond market activity, coupled with tight spreads, support expectations for a September rate cut and continued favorable conditions for fixed-income markets.

• Weaker job data and key events like Jackson Hole and August payrolls pave the way for a September rate cut.
• Strong technicals in the US bond markets persist, with significant issuance and demand driving tighter spreads, lower yields, and favorable pricing.
• The S&P showed minor volatility, while the Russell 2000 demonstrated stronger risk sentiment, reflecting optimism in HY markets due to overlapping names.
• This leads us to prefer fixed coupons over variable in fixed income credit markets.

Corporate credit spreads are at historic lows – will September’s bond supply shake up the market?

Neil Sun, Portfolio Manager on the BlueBay U.S. Fixed Income team, analyzes the tightest corporate bond spreads in decades and highlights potential opportunities.

• Investment-grade corporate bond spreads are near 80 bps over Treasuries, driven by strong demand despite slim risk compensation.
• With $130-150bn in new corporate issuance expected, the market’s ability to absorb supply without widening spreads will be tested.
• Long-term conditions support a bullish credit stance, but near-term widening may create selective re-entry opportunities for investors.

Fed Chair Powell excited investors last Friday with hints of a potential September rate cut. What’s next for credit markets?

Anne Greenwood, Institutional Portfolio Manager with RBC BlueBay’s Fixed Income team, breaks down the market reaction to the Jackson Hole Symposium.

• Fed Chair Jerome Powell signaled the potential for a September rate cut, citing balanced labor markets and easing inflation risks.
• U.S. risk assets remain well supported, but heightened uncertainty and a wide range of outcomes suggest volatility is likely to persist.
• It is important to maintain a cautious approach to credit risk and liquidity as markets prepare for seasonal shifts in debt supply.

All eyes are on Jackson Hole this week as investors digest recent economic data and look ahead to the Fed’s next moves.

Mindy Gudmundson, Institutional Portfolio Manager with RBC BlueBay’s U.S. Fixed Income team, breaks down the latest inflation data, rate cut expectations, and what to watch ahead of Chair Powell’s Jackson Hole speech.

• Headline inflation dipped to 2.7%, nearing the Fed’s target, but core CPI rose to 3.1%, keeping inflation risks in focus.
• Markets expect a 25 bps cut in September, with more cuts likely in the months ahead.
• Chair Powell’s speech in Jackson Hole is expected to provide clarity on the timeline and scope of policy easing.

BlueBay Senior Trader Peter Keenan highlights key themes following the most recent inflation data release. 

• Inflation Data Overview: July's Consumer Price Index (CPI) rose 0.2% month-over-month (headline) and 0.3% excluding food and energy, with year-over-year increases of 2.7% (headline) and 3.1% (core), aligning with expectations.
• Market and Fed Expectations: Markets now price a 96% chance of a 25 bps rate cut in September, up from 86% pre-CPI release. The Jackson Hole Symposium (Aug 21-23) is expected to signal further monetary easing, consistent with the Fed's potential 1-2 rate cuts this year.
• Economic Outlook: Despite a slowing pace of activity below 2% in late 2025, deregulation and policy easing may support economic growth into 2026. Corporate earnings have remained resilient, countering concerns of deeper economic trouble.

BlueBay Portfolio Manager Laurie Mount discusses how the fallout from Friday’s lousy jobs report could dominate Washington and Wall Street for some time.

• The July jobs report fell significantly below expectations, with only 73,000 jobs added versus the forecasted 104,000, while the unemployment rate rose to 4.2%, signaling a potential softening in the labor market.
• Treasuries rallied sharply, and markets have now fully priced in two Federal Reserve rate cuts by year-end, reflecting growing expectations for monetary easing.
• The FOMC's recent decision to hold rates steady saw rare dissent from two Governors, highlighting internal debate over balancing risks to growth and inflation amid ongoing tariff and labor market concerns.
• The Federal Reserve's data-driven approach will focus on upcoming CPI releases and jobs reports, with portfolio strategies being adjusted to prepare for potential lower interest rate environment.

Investment-grade bonds are having a strong year, but investors aren’t getting complacent.

Neil Sun, Portfolio Manager on the BlueBay U.S. Fixed Income team, discusses how portfolio managers are hedging their credit exposure despite a compelling market environment.

• Yields remain attractive, inflows are strong, and performance is solid—even with tight credit spreads.
• Managers are staying cautious, holding high-conviction positions while using hedging strategies like credit default swaps and options to protect against downside risks.
• In today’s market, managing risk is just as important as finding yield. Strategic hedging ensures portfolios stay resilient, no matter what comes next.

Staying invested doesn’t mean flying blind. Active risk management is key in tighter markets.

Fed policy and credit markets are at a pivotal moment.

Andrzej Skiba, BlueBay Head of U.S. Fixed Income, gives an update on monetary policy trends and their effects on the market:

• The Fed is unlikely to cut rates in July but may deliver 1-2 cuts by year-end, depending on trade developments and inflation trends.
• Treasury markets reflect expectations of more aggressive rate cuts under future Fed leadership, supporting a preference for U.S. curve “steepeners.”
• Strong technicals are driving credit market activity as investors lock in yields amid limited new issuance. Active management remains essential to uncovering value in tighter spreads.

As markets navigate shifting policy expectations and credit opportunities, staying agile is more important than ever.