Active Fixed Income Perspectives Monthly Pulse: September 2026

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Active Fixed Income Perspectives Monthly Pulse: September 2026

Vanguard Perspective

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September 22, 2026

Portrait of Sara Devereux
Sara Devereux
CIO VCM, Global Head of Fixed Income
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Portrait of Sara Devereux

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.
Portrait of Christopher Alwine
Christopher Alwine, CFA
Global Head of Credit
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Portrait of Christopher Alwine

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.
Portrait of Roger Hallam
Roger Hallam, CFA
Global Head of Rates
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Portrait of Roger Hallam

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.
Portrait of Justin Schwartz
Justin Schwartz, CFA
Head of Municipals
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Portrait of Justin Schwartz

Justin Schwartz, CFA

Head of Municipals

Key takeaways

Our base case remains for trend U.S. growth, supported by sustained business investment. With the trend of labor market data remaining firm and inflation elevated, the Fed raised rates by 25 basis points this month, and our base case now includes up to one additional hike in 2026.

Robust AI-related capital spending and stronger-than-expected corporate earnings are supporting growth and reinforcing strong underlying fundamentals in credit markets.

Higher energy prices from the prolonged war in Iran and an intensifying competition for capital driven by elevated sovereign borrowing and surging hyperscaler issuance are also contributing to the recent increase in global yields.

Overall, fixed income remains attractive, with real yields across the curve near 20-year highs. Our positioning reflects neutral U.S. duration, an overweight to high-quality credit, and an emphasis on carry and security selection with attractive long-end opportunities in municipals.

Outlook

Trend growth as the Fed tightens amidst strong investment and a prolonged Iran conflict.

Our base case remains for trend U.S. growth, supported by sustained business investment. Recent labor-market data has been firmer than expected, while inflation remains elevated, driven in part by one-off factors such as tariffs and higher energy prices. Given this strong trend in the data, our expectations for Fed policy have shifted toward further tightening. The Fed raised rates by 25 basis points this month, and our base case now includes up to one additional rate hike in 2026 as they look to recalibrate the policy rate.

AI-related capital spending remains robust, contributing to strong economic growth while also adding to inflationary pressures. The meaningful productivity gains associated with that investment still appear further out. Corporate earnings have also exceeded expectations, reinforcing strong underlying fundamentals despite increasing dispersion in valuations.

The prolonged war in Iran has pushed energy prices higher, adding to inflationary pressures. Competition for capital also remains intense, with elevated global sovereign borrowing needs compounded by the substantial year-to-date issuance from hyperscalers. These developments have also contributed to the recent rise in rates.

Risks to the downside include a slowdown in AI investment or a prolonged supply shock that slows demand. Conversely, faster AI productivity gains or broader economic growth could lead to a stronger growth scenario.

Our active positioning

Neutral duration in U.S. rates, up-in-quality carry in credit, curve-focused value in munis.

Rates: In U.S. rates, we have moved to neutral duration while maintaining an overweight to German bunds relative to U.S. Treasuries. Outside the U.S., we remain short duration with a curve-flattening bias in Japan and maintain underweights to France and Italy as a hedge against our credit overweight. In mortgage-backed securities, we hold an overweight position expressed through hybrid ARMs, CMOs, and non-agency RMBS.

Credit: We remain overweight credit, supported by strong fundamentals, but with the potential for further Fed tightening likely to limit additional spread compression. We continue to emphasize high-quality carry and security selection, favoring banks and utilities within investment grade while limiting high-yield exposure.

Municipals: The steep municipal curve and attractive long-end valuations continue to support a long-duration position, which serves as a hedge against our credit overweight. We are also selectively rotating out of credit and into attractive high-grade municipal structures.

 
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All investing is subject to risk including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Past performance is no guarantee of future results.

Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments.

Investments in bonds issued by non-U.S. companies are subject to risks including country/ regional risk and currency risk. These risks are especially high in emerging markets.

U.S. government backing of Treasury or agency securities applies only to the underlying securities and does not prevent share-price fluctuations. Unlike stocks and bonds, U.S. Treasury bills are guaranteed as to the timely payment of principal and interest.

High-yield bonds generally have medium- and lower-range credit-quality ratings and are therefore subject to a higher level of credit risk than bonds with higher credit-quality ratings.

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