BLOGThe Bird's Eye View
Timely Perspectives, Unconventional Thinking
We’re excited to share timely market insights, thoughtful perspectives and expert commentary as part of our commitment to providing modern investment solutions to modern challenges.
BLOGThe Bird's Eye View
Timely Perspectives, Unconventional Thinking
We’re excited to share timely market insights, thoughtful perspectives and expert commentary as part of our commitment to providing modern investment solutions to modern challenges.
Treasurys and rates. Upbeat labor data and Middle East tensions drove front-end rate volatility in June. A stronger-than-expected May labor report—with 172,000 jobs created versus 88,000 expected—and an upward revision to April payrolls pushed yields higher across the curve, led by the two-year Treasury, which rose from 4.04% to 4.15%.1
That move nearly reversed during the second week of June week as Middle East tensions escalated, but yields held firm until sentiment shifted on two developments: a ceasefire and a more hawkish debut from new Federal Reserve Chair Kevin Warsh. These developments shifted market expectations for Fed action by year-end from 14.3 basis points of rate increases at the end of May to 37.7 basis points by month-end. The yield curve flattened as the two-year rate increased and the longer end of the curve declined slightly.2
Corporate credit. Investment grade corporate spreads widened modestly from near year-to-date lows and ended June at 74.2 basis points, still well below historical averages. The Bloomberg US Corporate Grade Index yield to worst rose from 5.13% to 5.20%.2
SpaceX brought a $25 billion multi-tranche deal to market to refinance debt and fund operations, drawing roughly $90 billion of demand and securing investment grade ratings despite expectations for several years of negative cash flow. More broadly, first-half 2026 corporate bond issuance of $1.19 trillion is running well ahead of historical six-month periods and in line with 2020’s record pace.2
Securitized. During the month of June, Bloomberg US Securitized Index spreads widened from 24.5 basis points to 27.0 basis points, led by agency residential mortgage-backed securities (RMBS) amid uncertainty over rate increases and the Fed’s balance sheet plans for the mortgage market. Asset-backed securities (ABS) spreads tightened from a monthly high of 46.1 basis points to 43.7 basis points. Securitized performance of 0.21% landed between Treasurys at 0.28% and investment grade corporates at 0.19%.2
The Long Road to AI-Driven Productivity
Deputy Head of Global Value and Portfolio Manager
Artificial intelligence (AI) is widely expected to transform productivity and reshape labor markets. While we have already begun to see measurable productivity gains in certain areas, we believe that large-scale impacts may take longer to come to fruition.
Companies in Japan have already been using AI to help address workforce shortages amid a labor-constrained economy. The clearest productivity gains can be found in software engineering, where AI-assisted coding has already improved efficiency and boosted productivity. Beyond software development, however, most companies are still testing AI applications, making it difficult to identify measurable improvements in labor productivity or business performance.
This does not necessarily mean AI is overhyped, but rather that near-term expectations may be running ahead of reality. History suggests that the adoption of general-purpose technologies is a gradual process. New technologies are initially used to improve existing tasks by making them slightly faster or more efficient, and the greatest productivity gains typically occur later, when businesses redesign workflows and develop entirely new applications. For example, the personal computer’s transformative impact only emerged after organizations recognized its potential to be more than an advanced calculator or typewriter and reimagined how work could be performed.
AI’s near-term expectations may be running ahead of reality.
While current expectations for AI may exceed its real-world impact in the near term, this mismatch is not unusual for groundbreaking technologies. History has repeatedly shown that society tends to overestimate the short-term effects of innovation while underestimating its long-term influence. AI may follow this familiar pattern, with its most significant economic and productivity benefits unfolding over the coming decades rather than the next few years.