CONTRIBUTORS
Mohieddine (Dino) Kronfol
Chief Investment Officer, Franklin Templeton Global Sukuk and MENA Fixed Income
Key monthly market news
Market sentiment continued to improve in June 2025, with global fixed income markets recording another month of positive performance. The Bloomberg Global Aggregate Index returned 1.89% in US dollars over the month.
Gulf Cooperation Council (GCC) bonds also rose in June, with the FTSE MENA Bond – GCC Index posting returns of 1.46% in US-dollar terms.
Hard-currency emerging market bonds were up too, helped by a further weakening in the US dollar against most major currencies.
Global equities continued to rally in June after the United States delayed planned “reciprocal” tariff hikes that US President Donald Trump announced in early April, thus reducing investor fears of a global recession. Investors remained concerned about elevated inflation levels in certain regions, but reduced recession fears helped in improving consumer sentiment. The onset of the Israel-Iran conflict in the Middle East in mid-June, and its tenuous ceasefire at month-end, had minimal impact on global equity markets.
US and international benchmark crude oil futures prices increased in June with the price of Brent crude up more than 6% to US$67.96 per barrel (pb) at June’s close, while the cost of West Texas Intermediate crude increased over 7% to end the month at US$65.11 pb.
Outlook
Geopolitical and economic events are unfolding at a rapid pace. Our and the markets’ assessments of risks to growth and inflation are under constant review and are creating a material increase in volatility, which we expect to persist over the next few quarters.
While credit (and equity) markets have broadly recovered from the uncertainty associated with recent US policy making, we remain acutely aware of the persistence weaker US-dollar exchange rates, and still-fragile demand for long-dated US Treasury bonds.
Valuations, therefore, still favour benchmark rates over credit spreads, and our outlook continues to support an increase in defensive allocations to higher-quality fixed income sectors—such as GCC bonds.
Continue reading further by downloading the PDF, which highlights the performance, rating changes, issuances, and outlook for the month ending June 2025.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.