Muzinich Weekly Market Comment: Ceasefire

April 20, 2026

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Global markets maintained a strong risk-on tone last week, supported by easing geopolitical tensions as the likelihood of a major escalation in Iran diminished. Improved sentiment, reflected in lower volatility, allowed investors to refocus on economic data and earnings. Central banks signalled a more measured policy path and. despite lingering risks, the outlook remains broadly constructive assuming the conflict stays contained.

Last week price action across financial markets continued to exhibit a classic risk-on pattern. Sentiment remains upbeat, with our preferred gauge, the VIX, staying below 20 and grinding lower throughout the week. Financial conditions have loosened, reflecting relief across global markets as the worst-case scenario of a full ground offensive in Iran is becoming increasingly unlikely. As a result, the negative tail risk has diminished significantly. Earnings season and the International Monetary Fund (IMF) Spring meetings also helped divert attention away from geopolitical headlines, allowing investors to refocus on their day jobs of economic outlooks and corporate results.

President Trump struck an optimistic tone on Iran negotiations, claiming Tehran has agreed to “almost everything” and that a deal could be reached “fairly soon,” potentially rendering a ceasefire extension unnecessary. On a separate but related front, Trump announced a 10-day Israel-Lebanon ceasefire, now in effect, and signalled plans to host Prime Minister Netanyahu and President Aoun at the White House.¹ Meanwhile, Iran’s Foreign Minister Abbas Araghchi said the critical waterway for global energy supplies is now “completely open” for the duration of a 10-day ceasefire between Israel and Hezbollah in Lebanon.² (We note the strait was subsequently closed again over the weekend).

The vast majority of investors have now concluded a re-escalation of the conflict is not in anyone’s interest. The US has achieved its stated objective of degrading Iran’s military capabilities, while the Iranian regime has survived and may yet emerge from the conflict with enhanced regional standing, having demonstrated control over the Strait of Hormuz. Meanwhile, behind the scenes – and consistent with its preferred diplomatic style – China has signalled a clear push toward a peaceful resolution, reinforcing the broader expectation that tensions will continue to de-escalate.³ Prediction markets currently assign an 84% probability to Trump announcing an end to the military operation before the end of May.⁴ 

It was a relatively quiet week for US Treasuries compared to its European peers, with the yield curve slightly bull flattening. The IMF, however, issued a pointed warning to the US Treasury, given its view of the US running a persistent fiscal deficit averaging roughly 6% of GDP, combined with a growing reliance on short-dated debt issuance, now representing 22% of total funding. This is seen as eroding the safety premium that Treasuries have historically commanded. That erosion, the Fund cautioned, carries broader consequences, pushing up borrowing costs globally.⁵ 

As evidence, the IMF highlighted a narrowing spread between AAA-rated corporate bonds and Treasuries, which has compressed from over 55 basis points (bps) in early 2019 to roughly 35bps points today – a sign investors are demanding less of a premium for holding high-grade corporate securities, a telling vote of reduced confidence in the traditional safe-haven status of US Treasuries.5 Meanwhile former Treasury Secretary Henry Paulson was far less subtle than the IMF, suggesting US authorities need to prepare a backup plan to avert a potential future collapse in demand for Treasuries resulting from a growing imbalance of supply and a looming maturity wall. “We need an emergency break-the-glass plan, which is targeted and short-term, on the shelf, so it’s ready to go when we hit the wall.”⁶

Across European bond markets, curves aggressively bull-flattened, with front-end yields falling more than 20bps as central bank communication pushed back against the urgency to tighten policy in response to elevated energy prices. Christine Lagarde noted that higher energy costs have shifted the eurozone away from the European Central Bank’s (ECB’s) base-case outlook, though not sufficiently to justify rate hikes at this stage.⁷ Meanwhile, Andrew Bailey signalled no immediate rush to tighten policy, arguing it is too early to assess the economic impact of the war in Iran. He described the conflict as a “very big energy shock,” but emphasized its duration will be critical in shaping the Bank of England’s (BoE’s) inflation outlook.⁸ 

Reflecting this shift, overnight index markets now price around 40bps of tightening from the ECB and 23bps from the BoE, down from peak expectations of 76bps and 87bps, respectively, on 20th March.⁹ 

In its Spring Outlook update, the IMF – broadly in line with consensus – assumes the conflict remains limited in both duration and scope. Under that baseline, global growth is only marginally downgraded, slowing to 3.1% in 2026 from 3.3%. Europe is expected to be slightly more affected than the US, while Latin America emerges as a relative beneficiary (see Chart of the Week). Global headline inflation is projected to edge higher in 2026 before resuming its decline in 2027. However, the IMF emphasizes that downside risks dominate the outlook, with a longer or broader conflict, a reassessment of AI-driven productivity gains, or renewed trade tensions all posing material threats to growth and financial stability.¹⁰  

Corporate credit and currency markets continue to signal a clear risk-on tone. Credit delivered another strong week, with all sub-asset classes posting positive total returns and emerging markets (EM) outperforming across both investment grade and high yield. Notably, fund flows have turned a corner, with both EM hard currency and developed market high yield now attracting meaningful inflows.¹¹ 

The US dollar continued to weaken broadly. Former IMF Chief Economist and Harvard Professor Kenneth Rogoff added a structural dimension to the dollar debate, cautioning that the currency may be as much as 20% overvalued at current levels – though he expects any adjustment toward fair value to play out over five to six years rather than abruptly.¹²  

The week's best-performing currency was the Hungarian forint, which appreciated over 3% against the US dollar following a landmark election result. Peter Magyar's landslide victory ends Viktor Orbán's 16-year rule and signals a sweeping political realignment. Of particular significance for markets, the new government is expected to reset Hungary's relationship with Brussels – a shift that could unlock billions of euros in EU funds currently frozen over rule-of-law concerns. We believe such an outcome would deliver a meaningful fiscal boost to the Hungarian economy, with positive reverberations across the broader Central and Eastern European market.¹³

In commodity markets, energy took another leg lower with Brent crude falling below US$90 per barrel. Meanwhile, industrial metals told the opposite story, hitting new highs; the London Metals Index (LME), which tracks 6 major metals, has rallied almost 12% over the past 4 weeks, led by surging aluminium prices. JPMorgan Chase warned that the aluminium industry is heading toward a "black hole," as a serious and prolonged supply deficit takes hold in the market.¹⁴

Finally, global equities were broadly higher, with the Bloomberg World Large & Mid Cap Index rising more than 3%. In the US, the S&P 500 breached 7,000 for the first time, while technology-heavy indices outperformed – the Nasdaq and Korea's Kospi both gained over 6% on the week. As for US earnings season, it got off to a strong start, with the opening few days dominated by the major banks, who largely beat expectations. JPMorgan posted its highest-ever quarterly trading revenue at US$11.6 billion, Citigroup's equities revenue surged 39% to a record US$2.1 billion,¹⁵  Bank of America delivered earnings well above consensus,¹⁶ and Morgan Stanley beat expectations for a second consecutive quarter, driven by record returns in its wealth management division.¹⁷   Wells Fargo was the relative laggard, with net interest income coming in below estimates.¹⁵

Chart of the Week: IMF Economic Outlook – GDP Growth Forecast Comparison

Sources: IMF WEP Update, as of January 2026; IMF WEO April 2026 ∆ = April minus January forecast. Green = upgrade vs. Jan WEO, Red = downgrade. 

All sources are Bloomberg unless otherwise stated.

Past performance is not a reliable indicator of current or future results.

References to specific companies is for illustrative purposes only and does not reflect the holdings of any specific past or current portfolio or account.

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of April 20 2026 and may change without notice.

References

1. Bloomberg, “Trump Says Iran’s Concessions Pave Way for Deal to End War,” April 17, 2026
2. Bloomberg, “Iran Opens Hormuz Following Lebanon Truce in Boost for Peace,” April 17, 2026
3. Bloomberg, “Xi Vows Constructive Role as Iran War Drags World to ‘Disarray,’” April 14, 2026
4. Bloomberg, as of April 17, 2026
5. Bloomberg, “IMF Says Treasuries Losing Premium, Warns US on Debt Management,” April 15, 2026
6. Bloomberg, “Henry Paulson Suggests US Make a Break-Glass Treasuries Plan,” April 16, 2026
7. Bloomberg, “Lagarde Says Europe’s Economy Has Slipped Below ECB Baseline,” April 14, 2026
8. Bloomberg, “Bailey Says Bank of England in No Rush to Raise Interest Rates,” April 15, 2026
9. Bloomberg, as of April 17, 2026
10. International Monetary Fund World Economic Outlook, “Global Economy in the Shadow of War,” April 2026
11. Standard Chartered Global Research, as of April 2026
12. Bloomberg, “Rogoff Calls Dollar 20% Overvalued,” Warns Markets ‘Naïve’ on War,” April 15, 2026
13. Bloomberg, “Hungary’s New Leader Calls for Sweeping Change After Orban,” April 13, 2026
14. Bloomberg, “London Metals Index at Record High on Aluminum ‘Black Hole’ Fear,” April 17, 2026
15. UBS Equity Strategy, “1Q26 Earnings Brief: April 15,” April 15, 2026
16. Bank of America Beats Q1 Expectations, Analysts Boost Price Targets,” April 16, 2026
17. Bloomberg, “Morgan Stanley wealth biz continues record revenue streak,” April 16, 2026

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Index descriptions

FTSE100 - UKX Index: The FTSE 100 Index is a capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange. The equities us an investibility weighting in the index calculation. The index was developed with a base level of 1000 as of December 30, 1983.

MSCI DM - MXWO Index: The MSCI World Index is a free-float weighted equity index. It was developed with a base value of 100 as of December 31, 1969. MXWO indexed developed world markets and does not include emerging markets. MXWD includes both emerging and developed markets.

MSCI EM - MXEF Index: The MSCI EM Index is a free-float weighted equity index that captures large and mid cap representation across emerging market countries. The index covers approximately 85% of the free float-adjusted market capitalisation in each country

USHY - J0A0: The ICE BofA US Cash Pay High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt, currently in a coupon paying period that is publicly issued in the US domestic market.  Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of $250 million.

EUHY - HE00: The ICE BofA Euro High Yield Index tracks the performance of EUR dominated below investment grade corporate debt publicly issued in the euro domestic or eurobond markets. Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of EUR 250 million.  

EMHY – EMHY: The ICE BofA High Yield US Emerging Markets Liquid Corporate Plus Index is a subset of The ICE BofA US Emerging Markets Liquid Corporate Plus Index including all securities rated BB1 or lower. The ICE BofA US Emerging Markets Liquid Corporate Plus Index tracks the performance of U.S. dollar denominated emerging markets non-sovereign debt publicly issued in the major domestic and eurobond markets.

USIG - C0A0: The ICE BofA  US Corporate Index tracks the performance of US dollar denominated investment grade corporate debt publicly issued in the US domestic market. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of US$250 million.

EUIG - ER00: The ICE BofA Euro Corporate Index tracks the performance of EUR denominated investment grade corporate debt publicly issued in the eurobond or Euro member domestic markets. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity, a fixed coupon schedule and a minimum amount outstanding of EUR 250 million. 

EMIG – EMIB: The ICE BofA  High Grade Emerging Markets Corporate Plus index is a subset of the ICE BofA  Emerging Markets Corporate Plus Index (EMCB) including all securities rated AAA through BBB3, inclusive.

GILTS 7-10YR - G4L0: The ICE BofA  7-10 Year UK Gilt Index is a subset of the ICE BofA  UK Gilt Index (G0L0) including all securities with a remaining term to final maturity greater than or equal to 7 years and less than 10 years.

WORLD Index – Bloomberg World Large & Mid Cap Price return index is a float market-cap-weighted equity benchmark that covers the top 86% of market cap of the measured market.

GOLD - XAU Curncy – XAUUSD Spot Exchange Rate – price of 1XAU in USD Gold. The gold spot price is quoted as US Dollars per Troy Ounce. Gold Cross rates are available using XAU followed by 3-character ISO code of the cross currency.

BRENT - CO1 Comdty – current pipeline export quality Brent blend as supplied at Sullom Voe. ICE Brent futures is a deliverable contract based on EFP delivery with an option to cash settle. Date of launch: 23rd June 1988.

DXY- DXY Curncy - The US Dollar index (USDX) indicates the general int’l value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. The ICE US computes this by using the rates supplied by some 500 banks.

BITCOIN – Bloomberg Bitcoin index: Bloomberg Bitcoin Index is designed to measure the performance of the digital asset Bitcoin traded in USD. Please note, use as a financial benchmark may be restricted.

UST 7-10YR - ICE U.S. Treasury 7-10 Year Bond Index (IDCOT7)

ICE U.S. Treasury 7-10 Year Bond Index tracks the performance of US dollar denominated sovereign debt publicly issued by the US government in its domestic market. Qualifying securities must have greater than seven years and less than or equal to ten years remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and an adjusted amount outstanding of at least $300 million. The amount outstanding for all qualifying securities is adjusted to reduce by the amounts held by the Federal Reserve’s SOMA account. Bills, inflation-linked debt, original issue zero coupon securities and STRIPs are excluded from the Index; however, the amounts outstanding of qualifying coupon securities are not reduced by any portions that have been stripped. Agency debt with or without a US Government guarantee and securities issued or marketed primarily to retail investors do not qualify for inclusion in the index.

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