Bloomberg Surveillance · Monday, June 29, 2026
A 'new nominal GDP regime' with sustained higher nominal GDP growth is expected to put upward pressure on interest rates and bond yields. While this is positive for corporate cash flows and can reduce default risk, investors are advised to be underweight duration and overweight higher quality credit.
“So in a higher nominal GDP world? So let's let's put a number on this. So we just had some upward revisions on GDP growth. You know last week for the first quarter, GDP year of the year is growing at about six point one percent. That's a pretty healthy high number. What that does is it puts upward pressure on interest rates because remember nominal GDP is a combination of real plus inflation.”
“So what we're saying in bonds is that you want to be a little bit underweight duration, and you want to have some overweight towards higher quality credit, and even some you know, good quality double B bonds in the high yield sector to get some extra yield and even a little bit of emerging markets. So that way you get the yield, you get the income, but you don't have as much of the interest rate sensitivity in your bond portfolio.”