A World in Divergence: Brij Khurana on the Global Hunt for Fixed Income Value
7 JUL, 2025
By Jose Luis Palmer from RankiaPro Europe
Brij is a portfolio manager focused on global total return and unconstrained fixed income portfolios. He draws on the perspectives of Wellington Management’s global industry and credit analysts, specialist portfolio managers, and global macro strategists and conducts top-down and bottom-up research to identify and deliver actionable investment ideas across sectors, regions, and themes, primarily within the global fixed income markets.
Prior to joining Wellington Management in 2016, Brij was a senior vice president and portfolio manager at Pacific Investment Management Company (PIMCO), where he managed core, unconstrained, and multi-sector credit fixed income portfolios. He started his professional career trading structured products at Goldman, Sachs & Co. Brij received an MBA from Harvard Business School (2011) and a BA in economics from Princeton University (2007), with honors.
Let’s start with a macro perspective: How would you describe the current environment for global fixed income?
The global fixed income landscape is increasingly shaped by divergent fiscal and monetary policy. I expect U.S. growth to slow as its evolving policy towards both global trade and immigration begin to further weigh on demand and growth. On the other hand, I expect Europe and China to continue ramping up fiscal spending which could stimulate growth abroad. With this backdrop, I am expecting a further convergence in global yields and stronger performance from non-U.S. assets. The opportunity created by this divergence will take place across multiple regions and fixed income sectors which I believe calls for nimble and flexible global fixed income approaches.
What role does fixed income play today in building diversified portfolios, especially compared to the past decade?
Fixed income is regaining its role as a portfolio diversifier after a challenging couple of years. 2022 was a disappointment for asset allocators as both equities and fixed income sold off and fixed income has continued to struggle to be a source of diversification in recent years. However, I believe that bonds are better positioned to hedge equity risk with US growth slowing and inflation gravitating towards central bank targets.
Where are you currently finding value in fixed income markets? Do you favor corporate credit, sovereign debt, or more tactical assets like inflation-linked bonds?
In general, I favor inflation-linked government bonds over corporate credit as valuations remain expensive in the latter sector. I also favor Agency MBS, which I believe should perform well in a rangebound yield environment and benefit from potential Fed cuts. With the US Fed more likely to cut than hike, banks have a clearer view of the cost of their liabilities and will likely pivot back to purchasing Agency MBS. Furthermore, MBS offers compelling value with spreads close to their highest levels relative to corporates since the 1990s. Instead of traditional corporate credit, I am finding opportunities in non-core markets, such as global convertible bonds. Valuations remain compelling in convertibles while also allowing the fixed income team to express our favorable views of growth outside the United States.
In terms of duration, are you taking a more aggressive or conservative stance given the macro uncertainty and potential moves by central banks?
Global rates remain elevated and with inflation trending down, I am more constructive on duration and are sourcing it from a diversified mix of exposures such as inflation-linked bonds (ILBs), nominal government debt and Agency MBS. ILBs align with the fixed income portfolio team U.S. outlook of slower growth and persistent inflation. I am sourcing nominal bonds globally in countries like Norway, Australia and New Zealand where fiscal policies are more sound and in my opinion the market is underpricing the downside risks to growth.
What role do emerging market assets play in your fixed income portfolios today? Is this a good time to increase exposure, or is a more cautious approach advisable?
Emerging market (EM) assets play a key diversification role in our portfolios. I favor EM local debt and believe it can offer some of the most attractive long-term return potential, with high levels of inflation-adjusted yields. Despite concerns about fiscal discipline, EM fundamentals often compare favorably to some developed markets. I am also of the view that US equity exceptionalism is subsiding amid a slower growth environment, creating a favorable backdrop for non-U.S. assets, and especially emerging markets. I also see weakness in the U.S. dollar as a potential tailwind that further supports the return potential for EM local debt.
Which currencies do you see as potential sources of diversification or return in this environment, and which ones would you avoid for now?
I see medium-term potential for U.S. dollar weakness. While the dollar may be oversold in the short term, there are structural factors such as a persistent fiscal deficit and a negative net international investment position that I believe could point to long-term depreciation. The current US administration seems to have a preference for a weaker dollar that would aid US exports, which combined with slowing U.S. growth and improving global conditions, could further support a longer term weakening of the dollar. I favor EM currencies and commodity-linked DM currencies, which can benefit from global growth and are more insulated from geopolitical volatility. These currencies offer diversification and return potential, especially if the dollar’s strength gradually erodes.
How does the divergence among central banks—for example, the Federal Reserve versus the ECB or the Bank of Japan—impact your allocation decisions by country or region?
Divergence among central banks is a key driver of the variation in regional fixed income performance and has been an important factor in shaping our views of global markets. This variation has created compelling relative value opportunities; monetizing dispersion rather than betting on yields moving one way or another. For example, the ECB has been cutting at a faster pace than the Fed, which I believe is a mistake; and over time, we could see European rates converging with U.S.
Finally, is there any asset class or segment within fixed income that you believe is clearly undervalued by the market right now?
This is contrarian, but I view long-duration bonds to be amongst the most underappreciated assets in fixed income. The sell-off has primarily been driven by fiscal concerns, which I am worried about as well. However, market participants forgot how long duration bonds can also be an effective portfolio duration management tool. At current valuations, I believe long-end looks attractive relative to the likely pace of U.S. growth though this may take some time to materialize. This is why I prefer inflation-linked bonds, as they are less exposed to the fiscal volatility and better aligned with our macro outlook.
