04/19/2026–the bond market is currently reacting to a mix of geopolitical shifts and steady economic data. In developed markets, short-term yields have dropped following hopeful news regarding US-Iran negotiations, though these rates are still catching up to the faster movements seen in energy prices. In the US, the labor market remains surprisingly strong and manufacturing is showing signs of a comeback, leading us to bet against the middle-term valuations of US Treasuries. Over in Europe, investors are split between optimism for a resolution in the Middle East and the reality of a long-term conflict; because the risk isn’t quite right for a direct bet on rates, we’re using options to position for a rally while keeping hedges in place. The UK is seeing a similar defensive strategy using options. Meanwhile, Japan’s domestic economy is holding up well, but we expect the central bank to move slowly and communicate heavily before any rate hikes. In emerging markets, despite the ongoing noise, we believe the biggest risks are contained enough to start investing more heavily in local currencies. We’re staying neutral on local bonds due to inflation uncertainty, but we’ve increased our stakes in Hungary, Brazil, and Mexico while cutting back on Chile and Peru.