Positioning pays off: Conservative allocations and incoming cash flows shield high yield investors from geopolitical volatility that rattled broader markets.

Peter Keenan, Senior Credit Trader on RBC GAM's BlueBay U.S. Fixed Income team, examines how cash flows and positioning created an unexpected buffer against Middle East tensions.

1. High yield bonds showed resilience despite heightened Middle East tensions and surging oil prices on supply concerns from potential Strait of Hormuz disruptions.
2. Conservative positioning and substantial incoming cash from coupons, calls, and maturities created buying pressure in a market where geopolitical uncertainty sidelined new corporate issuance.
3. Treasury markets repriced sharply as investors unwound long positions, recalibrating expectations for Fed policy amid concerns about persistent inflation from rising energy costs.