Worst of big bond bear market likely past, says BlueBay fixed income CIO

"It's almost a moment where we are sort of re-establishing trust in the Fed to do their job... and that comes at a time when (US Treasury Secretary Scott) Bessent is actually becoming less orthodox and our trust in Bessent is a little bit more called into question," Dowding added.

Speaking about Britain, where fiscal policy is also in focus ahead of an October budget, Dowding said he had stressed the importance of fiscal prudence in conversations with the government.

New UK finance minister John Healey's options are limited by the ⁠weak state of the public finances and rising borrowing costs.

"I'm concerned that they're (UK government officials) wanting to believe that they've got more fiscal space than I think many market participants would be given to think that they do," Dowding said.

"In no uncertain terms, we are saying be careful here."