In short
Morgan Stanley’s Vishy Tirupattur discusses the 2026 global fixed-income outlook, arguing that “micro-trends” (especially AI financing) will drive markets more than macro shocks, supporting a generally positive risk stance.
Guest backgrounds
No guests; only Vishy Tirupattur, Morgan Stanley Chief Fixed Income Strategist, speaking from the Morgan Stanley Asia-Pacific Summit in Singapore.
Key claims
Base case is continued disinflation and growth converging toward potential by 2027; downside is “relatively benign.” U.S. remains pivotal; Fed cuts to neutral as unemployment rises, with a second-half recovery. Government bond yields range-bound; “two-stance” curve steepening is high conviction; dollar softens mid-year then rebounds.
Notable examples
2025 resilience from U.S. consumer balance sheets and AI-driven capex; 2026 data-center financing dominated by investment-grade issuance; spread widening likely in investment-grade/data-center AVS; favor agency MBS and senior securitized over U.S. investment grade.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VO2026 Economic and Market Predictions
0:41 to 1:49
Discussion on the challenges and projections for the global economy and markets in 2026.
“But what we see is micro-trends driving the markets in ways that add up to a generally positive stance on risk.”
US Economic Influences on Global Markets
1:49 to 2:58
Exploration of how US economic factors will influence global markets and investor outlook for 2026.
“The Fed faces a familiar conundrum, softening labor markets versus solid spending.”
Credit Markets and AI Financing
2:58 to 4:02
Insights into the role of credit markets and AI financing in shaping investment strategies.
“credit will likely play a central role in enabling the next wave of AI-related investments.”
Navigating Challenges Ahead
4:02 to 4:23
Reflection on the potential challenges in navigating the markets in 2026 and the nuances involved.
“And while we are constructive on 2026, it won't be a walk in the park.”
Transcript
Automatic transcript. May contain errors.0:02Vishy Tirupattur:Welcome to Thoughts on the Market. I am Vishy Tirupattur, Morgan Stanley's Chief Fixed Income Strategist, coming to you from the Morgan Stanley Asia-Pacific Summit underway in Singapore.
0:16Vishy Tirupattur:Much of the client conversation at the summit was about the market outlook for 2026. In the last few days, you've heard from my colleagues about our outlook for the global economy, equities, and cross-asset markets. On today's podcast, I will focus on the outlook and key themes ahead for the global fixed income market. It's Thursday, November 20th at 10 a.m. in Singapore. Last year, the difficulty of predicting policy really complicated our task. This year brings its own challenges. But what we see is micro-trends driving the markets in ways that add up to a generally positive stance on risk. Our economy's base case sees continued disinflation and growth converging towards potential by 2027, with the possibility that potential itself improves.
1:07Vishy Tirupattur:Notably, they present upside scenarios exploring stronger demand and rising productivity, while the downside case remains relatively benign. The U.S. remains pivotal, and the U.S.-led shocks, positive and negative, should drive outcomes for the global economy and markets in 2026. In 2025, the combination of a resilient U.S. consumer, supported by healthy balance sheets and rising wealth, alongside robust AI-driven capex, has underpinned growth and helped avoid recession, despite the headwinds of trade policy. These same dynamics should continue to support the baseline outlook in 2026, even though the path will be likely uneven.
1:51Vishy Tirupattur:The Fed faces a familiar conundrum, softening labor markets versus solid spending. The baseline assumes cuts to neutral as unemployment rises, followed by a recovery in the second half. Outside the US, most economies trend towards potential growth and neutral policy rates by end of 2026. But the timing and the trajectory vary, and as in recent years, global outcomes will likely hinge on US-led effects and their spillovers. Our macro strategies expect government bond yields to stay range-bound. And it is really a story of two halves. A front-loaded rally as the Fed cuts 50 basis points, pushing 10-year yields lower by mid-year before drifting higher into the fourth quarter.
2:36Vishy Tirupattur:Curve steepening remains our high conviction call, especially two-stance curve. The dollar follows a similar arc, softening mid-year and then rebounding into the year-end. AI financing moves to the forefront, putting credit markets in focus, a topic that has come up repeatedly in every single meeting I've had in Singapore so far. So from unsecured to structured and securitized credit in both public markets and private markets, credit will likely play a central role in enabling the next wave of AI-related investments. Our credit and securitized credit strategies see data center financing in 2026 dominated by investment rate issuance.
3:18Vishy Tirupattur:While fundamentals in corporate and securitized credit remain solid, the very scale of issuance ahead points to spread widening in investment rate and in data center related AVS. Carry remains a key driver for credit returns, but dispersion should rise. segments relatively insulated from the AI-related supply, such as U.S. high-yield, agency mortgage-backed securities, non-agency, CMBS, and RMBS, are poised to outperform. We favor agency MBS and senior securitized launches over U.S. investment grade, especially as domestic bank demand for agency MBS returns post-finalization of the Basel III. 2025 was a tough year to navigate.
4:04Vishy Tirupattur:And while we are constructive on 2026, it won't be a walk in the park. The challenges ahead look different. Less about macro shocks, more about micro shifts and market nuance. More details in our outlooks published just a few days ago. Thanks for listening. If you like the podcast, please leave us a review wherever you listen and share thoughts on the market with a friend or colleague today.
4:34The preceding content is informational only and based on information available when created. It is not an offer or solicitation, nor is it tax or legal advice. It does not consider your financial circumstances and objectives and may not be suitable for you.
From the publisher
Live from Morgan Stanley’s Asian Pacific Summit, our Chief Fixed Income Strategist Vishy Tirupattur explains why micro trends are likely to be more on focus than macro shocks next year.
Read more insights from Morgan Stanley.
----- Transcript -----
Vishy Tirupattur: Welcome to Thoughts on the Market. I am Vishy Tirupattur, Morgan Stanley's Chief Fixed Income Strategist, coming to you from the Morgan Stanley Asia Pacific Summit underway in Singapore. Much of the client conversation at the summit was about the market outlook for 2026.
In the last few days, you've heard from my colleagues about our outlook for the global economy, equities and cross asset markets. On today's podcast, I will focus on the outlook and key themes ahead for the global fixed income market.
It's Thursday, November 20th at 10am in Singapore.
Last year, the difficulty of predicting policy really complicated our task. This year brings its own challenges. But what we see is micro trends driving the markets in ways that adapt to a generally positive stance on risk. Our economists’ base case sees continued disinflation and growth converging towards potential by 2027, with the possibility that the potential itself improves. Notably, they present upside scenarios exploring stronger demand and rising productivity, while the downside case remains relatively benign. The U.S. remains pivotal, and the U.S. led shocks – positive and negative – should drive outcomes for the global economy and markets in 2026,
In 2025, the combination of a resilient U.S. consumer supported by healthy balance sheets and rising wealth alongside robust AI driven CapEx has underpinned growth and helped avoid recession despite the headwinds of trade policy. These same dynamics should continue to support the baseline outlook in 2026, even though the path will be likely uneven. The Fed faces a familiar conundrum softening labor markets versus solid spending. The baseline assumes cuts to neutral as unemployment rises, followed by a recovery in the second half.
Outside the U.S., most economies trend towards potential growth and neutral policy rates by end of 2026, but the timing and the trajectory vary. And as in recent years, global outcomes will likely hinge on U.S.-led effects and their spillovers.
Our macro strategists expect government bond yields to stay range bound, and it is really a story of two halves. A front-loaded rally as the Fed cuts 50 basis points, pushing 10-year yields lower by mid-year before drifting higher into the fourth quarter. Curve steepening remains our high conviction call, especially two tens curve. The dollar follows a similar arc, softening mid-year, and then rebounding into the year end.
AI financing moves to the forefront putting credit markets in focus, a topic that has come up repeatedly in every single meeting I've had in Singapore so far. So, from unsecured to structured and securitized credit in both public markets and private markets, credit will likely play a central role in enabling the next wave of AI related investments. Our credit and securitized credit strategists see data center financing in 2026 dominated by investment grade issuance.
While fundamentals in corporate and securitized credit remain solid, the very scale of issuance ahead points to spread widening investment grade and in data center related ABS. Carry remains a key driver for credit returns, but dispersion should rise. Segments relatively insulated from the AI related supply such as U.S. high yield, agency brokerage backed securities, non-agency CMBS and RMBS are poised to outperform. We favor agency MBS and senior securitized tranches over U.S. investment grade, especially as domestic bank demand for agency MBS returns post finalization of the Basel III.
2025 was a tough year to navigate, and while we are constructive on 2026, it won't be a walk in the park. The challenges ahead look different. Less about macro shocks, more about micro shifts and market nuance. More details in our outlooks published just a few days ago.
Thanks for listening If you like the podcast, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.