MidLincoln November 2026 Fixed-Income Strategy

Strategy Interpretation - November 2026

Developed markets

The COUNTRY STANCE MODEL is unequivocal: DM alpha is best sourced from selective Overweights while maintaining broad caution on high-debt European issuers. Australia and Israel screen as clear Overweights with strong macro and improving momentum, while Belgium, Germany, France and Denmark cluster in the Underweight bucket with weak macro/fiscal scores and negative momentum.

Period USD and local yield changes show DM valuations drifting higher in several European names, but the model’s negative fiscal and debt deltas argue that this repricing is not yet sufficient to justify rotation out of EM/frontier carry. With Average DM Yields at 3.77 versus GEM sovereign and corporate averages closer to 6.8–6.9, carry remains structurally inferior in DM, reinforcing a barbelled allocation: overweight selected DM Overweights mainly as duration anchors, while staying structurally light in weaker-core Europe.

Emerging markets

EM signals are distinctly pro-risk but discriminating. Ghana, Philippines, Colombia and Egypt all carry Overweight stances with strong macro and/or momentum scores, while the weakest EM cohort (Trinidad and Tobago, Thailand, Poland, Czech Republic, Peru) congregates in Neutral / Watch rather than outright Underweight. This asymmetry allows us to keep net EM risk positive while rotating away from soft spots.

USD-period data highlight Brazil and Colombia as still offering attractive hard-currency yields, with Colombia also flagged as an Overweight in the model. Watchlist sovereign wideners (Argentina) and corporate wideners (Brazil aviation and metals names, Colombian high-yield) flag where stress is concentrated and where we avoid structural long risk, preferring to express EM beta via sovereign Overweights with improving debt and fiscal metrics.

Frontier markets

Frontier remains a high-conviction sleeve for incremental carry and total return, driven by strong OVERWEIGHT signals in Ukraine, Dominican Republic, Zambia, Democratic Republic of the Congo and Jordan. These names combine high total scores with solid macro momentum and improving external balances, in contrast to Neutral / Watch signals in Slovenia, Lebanon, Slovak Republic, Romania and Ecuador.

Yield-level data confirm that frontier hard currency (e.g., Ukraine’s double-digit USD yields, Dominican Republic and Ecuador in USD screens) still compensates for political and restructuring risk. However, model dispersion is wide: Lebanon’s prior outsized returns and recent negative monthly performance underscore why the model keeps it in Neutral / Watch. We therefore keep frontier allocations diversified, size risk to liquidity, and avoid over-concentration in any single restructuring story.

Sectors

Sector tables show a clear differentiation between stable, high-quality buckets and high-beta segments that have borne the brunt of the YTD repricing. Last month, low-beta sectors such as Agency, Supranational, and Sovereign saw modest yield compression, while Cash and/or Derivatives cheapened slightly, keeping the short end relatively attractive as a risk-control tool.

On a YTD basis, the largest yield increases cluster in cyclical and higher-beta sectors: Transportation and Communications have seen the sharpest repricing, followed by Local Authority, Insurance and Industrial complexes. Our stance is to use Sovereign and Agency risk as the core of the carry book, with selective spread exposure in Banking and high-quality Industrial issuers. High-beta sectors, especially Transportation and Communications, remain tactical only and are funded from DM Underweights or trimmed EM beta when volatility spikes.

Last Month Model Review

Developed markets

Among DM Overweights, Australia remained a strong performer, delivering a latest-month return of 2.6 with the model score rising from 5.0 to 7.0 and the stance staying at Overweight. This validates the prior recommendation to hold an extended-duration position versus global DM peers, with returns supported by both carry and price appreciation.

On the DM Underweight side, the model kept Denmark and Germany in Underweight. Both delivered negative YTD outcomes (Denmark at -6.2, Germany at -7.1) combined with modest positive monthly returns, which indicates that while some of the earlier underperformance has already materialised, the model still sees insufficient macro and fiscal improvement to warrant upgrading. Portugal, previously an Underweight, was upgraded to Neutral / Watch after underperforming YTD; this suggests the bulk of the relative value case has been captured, and we thus now treat Portugal as funding-neutral.

Emerging markets

EM Overweights last month broadly delivered. Ghana’s Overweight call (prior total 5.0) added 2.4 in the latest month, pushing YTD returns to 24.1 and the total score to 7.0, reinforcing our constructive stance on restructured and reforming credits. The Philippines, despite a negative YTD of -2.1, generated 2.0 in the latest month with its score upgrading to 7.0; this suggests that previous underperformance is starting to reverse, consistent with strong macro fundamentals (macro score 6.0).

Colombia, while not in last month’s baseline list, now appears as an Overweight with solid YTD (13.1) and positive monthly returns, aligning with our broader strategy of favouring high-carry EMs with improving fiscal deltas. No EM name in the weakest-signal bucket generated a large positive surprise strong enough to challenge the Neutral / Watch stance, but the month’s modest recoveries in Thailand, Poland, Czech Republic and Peru highlight the importance of not running aggressive shorts in these names; instead, we keep them underweight to benchmark, not outright short.

Frontier markets

Frontier Overweights were a major positive contributor in the prior period. Ukraine, with a prior total of 7.0, delivered a latest-month return of 2.5 and a strong YTD of 13.4; its model score rose to 9.0, validating our high-conviction Overweight despite ongoing geopolitical risk. The Dominican Republic added 2.1 in the latest month, with YTD of 2.8 and its total score stepping up from 5.0 to 8.0, supporting continued Overweight as a core frontier holding.

Zambia, another prior Overweight, contributed 1.9 in the latest month with a 3.0 YTD gain and an upgraded score of 7.0. Despite the relatively modest YTD number compared to some higher-beta credits, the stability of returns and improving macro metrics reinforce the decision to keep it as a diversified frontier Overweight. Importantly, the model’s positive stance on these frontier Overweights contrasts with Neutral / Watch names like Slovenia, Lebanon, Slovak Republic, Romania, and Ecuador. Lebanon’s large negative latest-month performance despite massive prior-year gains exemplifies why we did not upgrade it to Overweight: avoiding this volatility was a key success of the frontier allocation framework.

Misses and underweights

The main area of model tension last month was on Underweights that subsequently delivered positive monthly returns. Bahrain, previously an Underweight with a total score of -3.0, generated a strong latest-month return of 3.2, even though YTD remains negative at -3.1. The model has since moved Bahrain to Neutral / Watch with a total score of 0.0, acknowledging that the earlier valuation gap has narrowed and that maintaining a structural Underweight could have become costly.

Azerbaijan and Portugal also shifted from Underweight to Neutral / Watch after posting positive monthly returns of 2.5 and 2.1, respectively. While these were not large absolute misses, they highlight that the underweight book must be actively rebalanced: once negative macro and momentum signals fade, the model correctly reduces conviction. Among prior Overweights, no country delivered a genuinely negative monthly return, but the Philippines’ still-negative YTD and the relatively low YTD gains in Zambia and Dominican Republic versus their improving scores remind us that timing remains critical: high model scores do not always translate into immediate large outperformance, and position sizing should be calibrated accordingly.

Developed Markets

Rates & sovereigns

The model directs DM risk towards Australia and Israel while remaining defensive on core euro-area sovereigns. Australia’s Overweight (total score 7.0) sits on robust macro (3.0) and strong momentum (4.0), with bond returns of 2.6 in the month and 8.3 YTD, justifying a modest duration extension in the 5–10yr sector. Israel, also an Overweight (total score 6.0), combines a strong macro score (4.0) with positive fiscal and debt deltas, even though recent monthly performance (-1.3) lagged; we see this as an opportunity to accumulate selectively, rather than a structural challenge to the thesis.

At the other end, Belgium, Germany, France and Denmark are clear Underweights with negative macro and momentum scores and elevated debt deltas. Despite modest positive monthly bond returns in Germany and Denmark, YTD returns remain negative, signalling that the adjustment process is incomplete. We prefer to hold these markets short duration relative to benchmark, with underweights concentrated in the long end where debt sustainability concerns and potential term-premium re-pricing are most acute.

With Average DM Yields at 3.77 and Average UST Yield less than 10 year duration at 4.71, there is limited compensation for assuming additional DM duration risk outside model Overweights. Accordingly, we maintain neutral to slightly short overall DM duration, using Australia and Israel as active risk sleeves while underweighting long-dated Belgium, France, Germany and Denmark as funding sources for EM/frontier.

Credit

DM credit strategy remains defensive and quality-focused. Sector data show that low-beta categories such as Agency and Supranational now offer yields in the mid-6s, only marginally below higher-beta corporate sectors but with far lower drawdown risk. Sovereign sector yields around 7.40 underscore that DM sovereign risk still provides competitive carry relative to many IG corporates, especially when blended with Overweight names like Australia and Israel.

YTD, high-beta sectors like Transportation and Communications have seen the sharpest yield increases, reflecting both spread widening and rate volatility. We do not chase this apparent valuation cheapness aggressively: the model’s Underweight stance on highly indebted DM sovereigns argues for restraint in correlated corporate sectors. Instead, DM credit exposure should be concentrated in Banking and high-quality Industrial Other names, mainly as liquidity tools and carry complements to sovereign positions, with minimal exposure to the most cyclical segments.

Implementation (model)

We translate the DM COUNTRY STANCE MODEL into positions via a structured risk budget that distinguishes Overweights, Underweights and Neutral / Watch names.

Implementation guidelines are:

• Duration: modest long in Australia and Israel (belly-focused), neutral in US and Canada, short in long-dated Belgium, Germany, France and Denmark.
• Curve: favour steepeners in core Europe by underweighting 20–30yr tenors versus 5–10yr; keep a flatter bias in Australia where macro strength could bring earlier tightening.
• Credit: keep DM corporates predominantly IG and short to intermediate duration; avoid subordinated bank capital and long-dated high-beta sectors closely linked to Underweight sovereigns.
• Risk controls: cap aggregate DM active risk at a level that ensures EM/frontier positions remain the primary driver of tracking error; use Cash and/or Derivatives at 3.83% yield as a buffer to reduce net duration quickly if macro or policy shocks materialise.

Emerging Markets

Hard currency (USD)

The EM COUNTRY STANCE MODEL remains constructive on hard-currency sovereigns, particularly Ghana, Philippines, Colombia and Egypt, all rated Overweight with total scores of 6–7. Ghana stands out with a 24.1 YTD bond return and strong macro and momentum scores, indicating the market is rewarding progress on restructuring and policy adjustment. Colombia combines a 13.1 YTD return with a balanced macro profile and positive momentum, which aligns with its favourable position in both the USD period-change table and GEM sovereign watchlists.

Conversely, the weakest EM signals (Trinidad and Tobago, Thailand, Poland, Czech Republic, Peru) remain in Neutral / Watch rather than Underweight. Their modestly negative YTD returns and negative momentum scores justify staying cautious but not aggressively short. The GEM sovereign tightener list highlights Ghana again, along with Bahrain and Nigeria, as beneficiaries of recent spread compression; in Ghana’s case, this confirms the model Overweight, while in Bahrain it justifies the upgrade from Underweight to Neutral / Watch.

Our implementation is to maintain an overweight in USD-denominated Ghana, Philippines, Colombia and Egypt, funded from Underweights in DM euro-area sovereigns and high-beta EM credit where the model conviction is lower. We keep credit selection tight, favouring benchmark issues with cleaner documentation and more robust secondary liquidity, and we avoid adding to distressed names like Argentina despite high headline yields, as flagged by its widening in the GEM sovereign widener list.

Local currency

Local-currency EM remains a selective opportunity. LOCAL CURRENT YIELD LEVELS show very high nominal yields in Turkey (around the mid-30s) and Brazil (mid-teens), while Colombia, Dominican Republic, Paraguay and Uzbekistan also offer elevated carry. However, FX and inflation risks vary sharply, and the COUNTRY STANCE MODEL does not currently list Turkey as an Overweight; instead, Turkey appears in hard-currency corporate tighteners, suggesting credit differentiation rather than a broad sovereign local-currency buy.

Brazil offers both high local yields (15.15 with a significant period increase) and respectable hard-currency levels. Yet Brazil does not feature as an EM model Overweight; we therefore treat Brazilian local bonds as a tactical carry trade only, conditioned on partial or full FX hedging and tight drawdown limits. Colombia, by contrast, has both strong model support and attractive local yields (12.79), making it one of the few names where local risk can complement hard-currency exposure, again with currency risk carefully managed.

In aggregate, we maintain a tilt towards EM hard-currency over local, using local exposures mainly in countries where the model is positive and FX regimes are more predictable. High-carry local markets such as Turkey remain on the high-yield screen and can be used opportunistically by investors with strong FX risk appetite, but they are not core Overweights in our baseline allocation.

Implementation (model)

The EM allocation follows the COUNTRY STANCE MODEL with a differentiated approach between Overweights and Neutral / Watch names.

Implementation guidelines are:

• Hard currency: overweight Ghana, Philippines, Colombia and Egypt in USD sovereign and quasi-sovereign curves (primarily 4–10yr), avoiding excessive concentration in a single restructuring case. Neutral exposure to Neutral / Watch names, using them mainly for diversification.
• Local currency: favour Colombia local and selectively Brazil local as tactical trades with FX hedging; remain cautious on local risk in Thailand, Poland and Czech Republic given negative momentum.
• Curve: focus on the belly where carry and roll-down are strongest; avoid long-dated segments in countries with high debt deltas or fiscal uncertainty.
• Risk controls: cap single-country EM exposure; use GEM sovereign and corporate widener/tightener lists as early-warning tools rather than primary allocation drivers. High-beta corporate names in Brazil, Colombia, Luxembourg and UAE flagged as wideners should not be used as core EM beta; if held, keep them small and hedge with index protection.

Frontier Markets

Market view

Frontier remains a key source of differentiated alpha, but requires disciplined sizing and diversification. The COUNTRY STANCE MODEL assigns strong Overweight scores to Ukraine (9.0), Dominican Republic (8.0), Zambia (7.0), Democratic Republic of the Congo (6.0) and Jordan (6.0), all with positive macro scores and generally improving debt or current-account deltas. Period and YTD performance confirm that, despite volatility, these Overweights have delivered solid returns.

In contrast, Slovenia, Lebanon, Slovak Republic, Romania and Ecuador all sit in Neutral / Watch with lower or more ambiguous total scores. Slovenia’s recent negative bond month and Lebanon’s negative monthly performance after outsized prior-year returns underscore the elevated event risk in frontier names without strong macro or momentum support. We therefore keep these markets underweight to benchmark or flat, using them, at most, for small tactical trades rather than strategic allocations.

Overall, we maintain a constructive frontier stance but stress that risk is concentrated: positions must be scaled to liquidity and event risk, with explicit criteria for de-risking around political, legal or restructuring milestones.

Implementation (model)

Frontier implementation follows a multi-pillar approach grounded in the model signals:

• Core Overweights: maintain strategic hard-currency Overweights in Ukraine, Dominican Republic, Zambia, Democratic Republic of the Congo and Jordan. Focus exposure in benchmark EUR/USD lines with cleaner documentation and better secondary liquidity.
• Curve and duration: concentrate in the 3–8yr sector where duration is manageable and potential recovery or rating-upgrade stories are better reflected. Avoid very long-dated paper in names with unresolved restructuring risk.
• Neutral / Watch names: keep Slovenia, Lebanon, Slovak Republic, Romania and Ecuador at or below benchmark weights. Given Lebanon’s historical return profile and recent negative month, any exposure should be treated as a trading position with strict loss limits.
• Risk controls: cap aggregate frontier exposure as a share of total EM/Frontier risk; apply higher required return hurdles and tighter stop-losses than for EM IG. Use Cash and/or Derivatives to hedge systemic risk and scale down frontier exposure quickly in periods of global risk-off.

Sectors

Market view

Sector data show a clear divergence between stable high-quality segments and more cyclical, high-beta sectors:

• Last month: lower-beta sectors such as Agency (6.61), Supranational (6.75) and Sovereign (7.40) saw modest yield declines, indicating steady demand for high-quality duration and spread. Cash and/or Derivatives yields rose slightly to 3.83, keeping the front end attractive as a risk-control tool.
• YTD: Transportation and Communications experienced very large yield increases (over 5 and nearly 5 points, respectively), indicating significant risk repricing. Local Authority, Insurance, Utility, Financial Other and Industrial have also widened materially, reflecting both macro uncertainty and sector-specific challenges.

This pattern argues for a barbell sector strategy: use Sovereign, Agency, Supranational and high-quality Banking as the core yield engine, with limited opportunistic allocation to higher-beta sectors where idiosyncratic risk is adequately compensated and aligned with positive country signals. High-yield GEM corporate averages at 8.43 indicate that investors are being paid for assuming additional risk, but the GEM corporate widener list highlights how quickly this can reverse in stressed names.

Implementation (model)

Sectors are implemented as overlays to the country stances:

• Core allocations: favour Sovereign and Agency paper in DM Overweight and EM/Frontier Overweight countries as the primary source of duration and carry.
• Financials: maintain exposure to Banking and Insurance where underlying sovereigns are Neutral / Watch or better; avoid subordinated instruments in countries flagged as Underweight or with weak fiscal/d ebt deltas.
• Cyclicals and high beta: Transportation, Communications, Industrial and Financial Other are used only tactically, ideally in countries where the COUNTRY STANCE MODEL is positive and where YTD widening has created clear mispricings. Exposures to issuers in Brazil, Colombia, Luxembourg and UAE flagged in the GEM corporate widener list should be tightly sized and, where possible, hedged.
• Risk controls: cap sector concentration so that no single cyclical sector dominates portfolio risk. Use Cash and/or Derivatives to modulate duration and beta quickly in response to changes in policy (e.g., FOMC, BOE, BOJ) or sudden credit events. Regularly cross-check sector allocations against country model scores to avoid unintended risk build-up in Underweight jurisdictions.