Active Fixed Income Perspectives Monthly Pulse: June 2026

Active Fixed Income Perspectives Monthly Pulse: June 2026

Expert Perspective

June 22, 2026

Sara Devereux

CIO VCM, Global Head of Fixed Income

Sara Devereux

CIO VCM, Global Head of Fixed Income

At Vanguard since 2019

In industry since 1992

Sara Devereux is a principal and global head of Fixed Income Group. Ms. Devereux has oversight responsibility for investment activities within the rates-related sectors of the taxable fixed income market including foreign exchange. Prior to joining the firm, Ms. Devereux was a partner at Goldman Sachs, where she spent over 20 years in mortgage-backed securities and structured product trading and sales. Earlier in her career, she worked at HSBC in risk management advisory and in interest rate derivatives structuring. Ms. Devereux started her career as an actuary at AXA Equitable Life Insurance. Ms. Devereux earned a B.S. in mathematics from the University of North Carolina at Chapel Hill and an MBA from the Wharton School of the University of Pennsylvania.

Christopher Alwine, CFA

Global Head of Credit

Christopher Alwine, CFA

Global Head of Credit

At Vanguard since 1990

In industry since 1990

Christopher Alwine is global head of Credit and Rates, where he oversees portfolio management and trading teams in the United States, Europe, and Asia-Pacific for active corporate bond, structured product, and emerging markets bond portfolios. He joined Vanguard in 1990 and has more than 20 years of investment experience.

Mr. Alwine was previously head of Vanguard's Municipal Group. There, he led a team of 30 investment professionals who managed over $90 billion in client assets across 12 municipal bond funds. He has served in multiple roles throughout his career in the Fixed Income Group. His experience includes trading, portfolio management, and credit research. Mr. Alwine's portfolio management experience spans both taxable and municipal markets, as well as active and index funds. He is also a member of the investment committee at Vanguard that is responsible for developing macro strategies for the funds.

Mr. Alwine earned a bachelor's degree in business administration from Temple University and an M.S. in finance from Drexel University. He holds the Chartered Financial Analyst® certification.

Roger Hallam, CFA

Global Head of Rates

Roger Hallam, CFA

Global Head of Rates

At Vanguard since 2022

In industry since 2000

In his role as global head of Rates, Roger Hallam oversees the Global Rates, Treasury, Mortgages and Volatility, Currency, and Money Market Teams. He is a member of the Vanguard Senior Leadership Team and the Senior Investor Team. Prior to joining Vanguard, Mr. Hallam had been at J.P.Morgan Asset Management for more than 20 years as a senior global fixed income portfolio manager, and more recently as chief investment officer for Currencies. Mr. Hallam served as chair of the Currency Investment Policy Committee and was a member of the Global Fixed Income, Currency, and Commodity Investment Quarterly strategy team. He earned a B.S. from the University of Warwick and is a CFA charterholder.

Paul Malloy, CFA

Head of U.S. Municipals

Paul Malloy, CFA

Head of U.S. Municipals

At Vanguard since 2005

In industry since 2005

Paul Malloy is head of municipal investment at Vanguard. Previously, he was head of Vanguard Fixed Income Group, Europe. In this role, Mr. Malloy managed portfolios that invested in global fixed income assets. He also oversaw Vanguard's European Credit Research team. Mr. Malloy joined Vanguard in 2005 and the Fixed Income Group in 2007 and has held various portfolio management positions in Vanguard's offices in the United Kingdom and the United States. In past roles, he was responsible for managing Vanguard's U.S. fixed income ETFs as well as overseeing a range of fixed income index mutual funds.

Mr. Malloy earned an M.B.A. in finance from the Wharton School of the University of Pennsylvania and a B.S. in economics and finance from Saint Francis University. He is a CFA® charterholder.

Key takeaways

As widely expected, the Fed left the policy rate unchanged at its June meeting. The updated statement, along with the committee’s projections and vote, signal a shift in focus toward the inflation side of the mandate. While markets priced in increased odds of additional rate hikes, the long end of the yield curve rallied, suggesting a market supportive of continued inflation vigilance and Fed credibility.

Although important details remain unresolved, the potential resolution to the conflict in Iran appears promising. We expect that continued de-escalation would remove a stagflationary impulse from the economy by easing energy-price pressures and would provide the Fed with greater flexibility to remain patient.

Our base case is for U.S. growth to remain resilient, supported by strong AI-driven investment, steady consumer spending, and continued fiscal support.

Our broad portfolio positioning reflects a neutral stance on duration and curve, an overweight to high-quality credit, and an emphasis on sector and security selection.

Outlook

Two-sided risks to growth

AI-related capital investment remains a powerful growth catalyst. Consumer spending has also held up, while fiscal support continues to provide a tailwind. Taken together, we expect this backdrop to support near-trend U.S. economic growth in 2026. At the same time, inflation remains elevated, and the labor market—while still firm—is likely to gradually ease as the year progresses.

The Fed left the policy rate unchanged at its June meeting. The more significant update was a hawkish shift in the committee’s rate projections, with nine of 18 officials now penciling in at least one rate hike by year-end 2026. The updated statement, together with the committee’s projections and vote, suggest a Fed that is shifting its focus to the inflation side of its mandate. Notably, while the market priced in a greater chance of rate hikes over the course of the year, the long end of the yield curve rallied, suggesting a market supportive of inflation vigilance and Fed credibility.

The inflation picture remains complex. Price pressures continue to run above the Fed’s target, and recent labor-market data has been firmer than expected. However, tariffs, the conflict in Iran, and AI-related measurement effects have added volatility to inflation readings while seasonality in labor data may be overstating labor market strength.

Geopolitics remain an important swing factor. Recent announcements around a potential resolution to the conflict in Iran are encouraging, though details still need to be finalized. If tensions continue to ease, we expect the upward pressure on energy prices to moderate, reducing a key stagflationary risk. We would expect this to provide the Fed with greater flexibility to remain on hold while it assesses underlying inflation and labor-market trends.

Risks to our outlook remain two-sided. Stronger-than-expected AI-driven investment could add to demand-side inflation pressures, while faster productivity gains from the AI buildout could help offset them. Meanwhile, a more muted or delayed payoff from AI investments or a re-escalation of the conflict in Iran present downside risks to growth.

Strategy & positioning

Neutral on duration and constructive on credit

Rates: In U.S. rates, we have moved to neutral on duration and curve, with 10-year Treasury yields near the center of our expected range. Outside the U.S., we remain short duration with a curve-flattening bias in Japan. We maintain an overweight to mortgage-backed securities, with targeted exposure to hybrid ARMs, CMOs, and non-agency RMBS, while reducing agency CMBS exposure.

We continue to prefer structures with attractive carry and convexity over broad beta exposure.

Credit: We remain overweight credit, with an up-in-quality bias and a focus on generating alpha through bottom-up security selection. We expect investment-grade spreads to remain rangebound near historically tight levels. Restrictive Fed policy and a robust new-issue pipeline should limit the scope for further tightening, while elevated yields, resilient corporate fundamentals, and strong investor demand should keep spreads well anchored within the range. Within investment grade, we favor banks and utilities given their strong fundamentals and defensive characteristics. In high yield, we are emphasizing lower beta exposure while generating value through selection in an environment of greater dispersion. AI-driven capital spending remains a powerful market theme, resulting in a significant increase in new supply across global markets. We are underwriting this theme across our sub-asset-class coverage, leveraging the breadth of our investment expertise to identify correlated risks and allocating capital to the most attractive risk-adjusted opportunities.

Municipals: Municipal bonds continue to benefit from strong inflows and attractive tax-equivalent yields. The steepness of the muni curve offers compelling carry and roll-down potential, particularly around the 20-year segment. Valuations inside 10 years have become less attractive. We maintain a barbell curve strategy while selectively taking advantage of sector dispersion and opportunities in credit.

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