Raymond James has increased exposure to longer-dated government bonds in the fixed income allocations of its Low and Medium-Low Risk portfolios, after a sell-off in global government bond markets created what it called a “more attractive entry point”.
The increase is funded by reductions in investment grade credit and shorter-dated government bonds. This brings portfolio duration closer to the wealth manager’s strategic asset allocation, though the portfolios remain underweight duration overall.
The 2026 global bond sell-off has been driven by heavy government bond issuance against a buyer base demanding higher compensation, with the OECD expecting $29trn of bond issuance in 2026. Much of this is refinancing old debt, compounded by elevated fiscal deficits, rising government debt and heavy AI infrastructure borrowing competing for long-term capital.
This pushed long-term yields in the US, UK, Japan and the eurozone to multi-decade highs by early October, with the UK 30-year gilt yield hitting 6% for the first time since 1998 and the US 10-year treasury yield reaching its highest since 2002, before a further leg up in mid-October on a separate oil price shock.
Raymond James said the sell-off reflects legitimate concerns about persistent inflation and deteriorating fiscal positions across developed economies. However, the firm’s asset management team believes valuations have adjusted enough to offer higher starting yields, improve carry and widen the income cushion against further market falls.
Abbas Owainati, head of portfolio management and asset allocation at Raymond James, said: “The recent sell-off has created a more attractive entry point for government bonds. We see an opportunity to selectively add duration, but given the potential for continued volatility, we are doing so gradually and remain underweight relative to our strategic positioning.”
Markets are currently pricing in four Bank of England interest rate increases over the next 12 months. Raymond James expects fewer rises than this, though it said risks remain tilted towards higher inflation and interest rates.
The team views the UK as particularly exposed to the impact of higher borrowing costs on households, businesses and public finances. It expects the Bank of England to adopt a more cautious stance, which it said could support a moderation in yields and benefit longer-duration bonds.
Raymond James added that investment grade credit fundamentals remain resilient, with attractive yields, but spreads are tight by historical standards. It does not expect a material credit event, but said limited scope for further spread compression supports the shift towards government bonds.
A steep government bond yield curve allowed the duration increase without reducing portfolio yield, the team said.