Interest Rates

How have U.S. Treasury auction results been? While a handful of U.S. Treasury auction results drew attention in April, we haven’t seen a widespread shift in demand across the curve in recent auctions. T-Bills in particular have seen solid demand as net supply is currently negative. Precisely determining “foreign demand” in real time is quite difficult, but, on the whole, investor demand doesn’t appear to have shifted as definitively as some press reports may lead you to believe.

Are there any signs that investors are changing their allocations to cash assets like MMFs (Money Market Funds)? MMF assets at the industry level have been growing this year, albeit at a slower pace than the strong run up seen during the prior 2 years. Instead of a shift in cash allocations, which largely held steady even during April of this year, perhaps we’re seeing cash allocations being maintained around all-time highs as measured by industry assets under management.

Are there potential policy changes on the horizon that you’re watching? Details around the implementation of central clearing of U.S. Treasuries, potential design changes of the Standing Repo Facility, as well as potential changes to the Supplementary Leverage Ratio.

— Dan LaRocco, Head of U.S. Liquidity, Global Fixed Income

• Despite some attention-grabbing Treasury auctions in April, overall demand — especially for T-Bills — remains solid, with no broad signs of investor fatigue.
  
  
• Cash allocations like money market funds continue to grow, though more gradually, suggesting investors are maintaining high cash levels rather than reallocating.
  
  
• We’re closely monitoring potential policy shifts that could reshape Treasury market dynamics such as central clearing, repo facility tweaks, and leverage ratio changes.

Credit Markets

High yield (HY) saw solid performance last month with the strongest monthly spread performance since 2023. Despite some volatility in the rates market, HY spread tightening offset negative impacts from duration, resulting in attractive absolute returns. As trade tensions eased, capital markets activity resumed. In May, $32 billion of HY gross issuance represented substantial increases in monthly volume from the tariff-induced market slowdown in April.

While HY supply was elevated last month, technicals continued to be favorable with HY producing its 5th consecutive supply deficit year-to-date due to continued strong organic inflows. Year-to-date, Calls ($55.5bn), Tenders ($11.3bn), and Maturities ($21.3bn) totaling $88.1bn compares to $105.8bn of gross new-issuance year-to-date. Meanwhile, coupon reinvestment ($28.5bn, assumes 75% reinvestment rate) and retail inflows (+$1.8bn) total $30.3bn. With Fallen Angels exceeding Rising Stars by $10.8bn, the high-yield bond market has produced a supply deficit of -$1.4bn in 2025 year-to-date following four consecutive years of supply deficits (-$496bn aggregated).

— Ben McCubbin, Co-Head of High Yield, Global Fixed Income

— Sau Mui, Co-Head of High Yield, Global Fixed Income

• In May, $32 billion of gross issuance priced in the high yield bond market representing substantial increases in monthly volume from the tariff-induced market slowdown in April.
  
  
• While high yield supply was elevated last month, technicals continued to be favorable with high yield producing its 5th consecutive supply deficit year-to-date due to continued strong organic inflows.
  
  
• The high-yield bond market has produced a supply deficit of -$1.4 billion in 2025 year-to-date.
  

Equities

Across 2025 year-to-date – global equities are up 7% with notable separation between U.S. equities (+2%) and strong gains (in dollar terms) in both non-U.S. developed (+18%) and emerging market equities (+12%). U.S. equities have gained back a little ground over the last month with some help from the resurgence in megacap tech. Cyclical areas of the market performed better than defensive areas over this stretch. Non-U.S. equity returns continue to benefit from decent performance in local currency terms plus currency impacts when in dollar terms.

The S&P 500 P/E (Price-to-Earnings) ratio widened back out to a little under 22x, above 2024 year end and not far below February’s peak, reflecting reduced fear of meaningful disruption from trade policy. There continues to be a bifurcation between Megacap tech and non-megacap tech earnings contributions. Some of the potential tariff headwinds that are not embedded in company guidance skews risk to the downside in earnings expectations. Although the tech rally could continue to support U.S. equities, we do not believe it is a good environment to take a sizable position in either direction. Instead, we prefer non-U.S. developed equities within our tactical equity allocation.

— Christian Lambert, Investment Analyst, Global Asset Allocation

• U.S. equities have performed well over the last month with some help from the resurgence in megacap tech.
  
  
• The S&P 500 P/E widened back out to a little under 22x, which is above 2024 year-end levels.
  
  
• Although the tech rally could continue to support the U.S. market, we do not believe it is a good environment to take a sizable position in either direction.

Real Assets

Listed infrastructure has long been a favored option of global investors due to the sector’s high barriers-to-entry, predictable, inflation-linked cash flows, and equity-like returns with lower volatility. These characteristics have led to premium valuations for the sector, as listed infrastructure historically trades at a 9% premium to global equities on an EV/EBITDA basis.

Starting in 2022, the global risk-free rate began an upward trend driven by central banks need to combat inflationary pressures coming out of the pandemic. Global rates have stayed at these higher levels and this more normalized interest rate environment has pushed infrastructure multiples to the lower end of their historic trading range.

A supportive fundamental outlook for infrastructure has drawn investor interest, especially with the backdrop of higher global power demand driven by data centers, energy independence and security, and onshoring and decarbonization of industrial processes. These growth drivers, along with the sector’s essential service nature and historically low relative valuations make the potential for investment in the sector particularly compelling.

— Jim Hardman, Head of Real Assets, Multi-Manager Solutions

• Infrastructure’s attractive characteristics have driven long-term relative valuation premiums.
  
  
• Higher rates have pressured infrastructure valuations lower, creating an opportunity for investors.
  
  
• We increased our overweight to infrastructure on resilient cash flows, accelerating fundamentals, and attractive valuations.