Cross-border fixed income planning used to follow a simple script: hold cash while rates were high, buy duration once the Federal Reserve started cutting, and let the income take care of itself. Six months ago, that script still looked broadly sound. It doesn’t any more, and the reason has as much to do with a shock in the Gulf as with anything the Fed has said directly.

A rate-cutting year that stopped being one

The Fed’s reversal, in numbers

At the start of 2026, the Federal Reserve’s own projections pointed to two or more rate cuts over the year. The consensus among wealth managers was straightforward: park excess cash short-term, wait for the cutting cycle, then extend duration once it began. That was the plan built into a lot of client portfolios coming into the year.

Then, in February, the conflict between the US, Israel and Iran reached the Gulf states directly for the first time, and oil prices moved with it. By June, the Fed’s own projections had flipped. Median expectations shifted to one or two rate hikes for 2026, a clear reversal from the cuts pencilled in before the conflict began, following the rise in energy prices after the 27 February onset of the US-Iran conflict. At its June meeting, under new chair Kevin Warsh, the Federal Open Market Committee held its target rate in the 3.50% to 3.75% range. The year-end 2026 median projection actually moved a quarter-point higher than the current range, rather than lower, a genuine surprise against where the conversation stood in January.

The Bank of England moved on the same signal

The Fed wasn’t the only central bank to reverse course. The Bank of England held its base rate at 3.75% through its February, April and June meetings this year, and the hawkish dissent inside the Monetary Policy Committee grew at every one of them, from a 5-4 vote in February to 8-1 in April to 7-2 in June, with two members now voting for an outright rise to 4%. UK services inflation is running at 3.7%, and the Bank’s own minutes point to the same Gulf conflict and energy price shock behind the Fed’s shift. The next MPC decision lands on 30 July, and market pricing has the Bank holding through summer with a real possibility of a hike to 4% at that meeting or in September if inflation stays sticky.

That matters more for a UK expat than a US data point on its own would. This isn’t American policy quietly filtering through an exchange rate. It’s the same shock moving both central banks independently and at close to the same time, which is a harder signal to argue with than either one alone.

For families who spent March reassessing where their wealth and residency sit after the same Gulf shock, this is the less-discussed half of the story. The jurisdiction question and the income question moved at the same time, driven by the same event, and most portfolios were positioned for neither.

What this means for income allocation

Cash and duration are no longer doing the work

Cash and money-market yields, which looked attractive through 2024 and 2025, are now expected to drift down more slowly than most portfolios assumed, since the cutting cycle that was meant to arrive this year keeps being pushed back. That sounds like good news for anyone still holding cash, and in the short term it is. The longer-term problem is that it leaves income-focused portfolios with a gap: the reinvestment risk that was supposed to be solved by moving into duration this year hasn’t gone away, it has simply been delayed and made harder to time.

Meanwhile the 10-year Treasury looks set to hold in a 4% to 4.5% range rather than fall meaningfully through the second half of the year, with most forecasters now favouring a below-benchmark average duration and income, rather than price appreciation, doing the majority of the work for bond investors. Inflation remaining above target and fiscal pressure on longer-dated yields are both cited as reasons the easy “just buy the ten-year” trade of previous cycles isn’t available in quite the same form this time.

For cross-border families in particular, this matters more than it might for a purely domestic portfolio. Many hold income-generating assets across two or three jurisdictions already, often inherited from where a career or a property happened to be, rather than chosen deliberately. A flat-to-rising rate environment punishes that kind of accidental positioning more than a falling one does, because there is no broad tailwind lifting bond prices to paper over a scattered structure. This is exactly where cross-border fixed income planning earns its keep: it forces a deliberate choice that an accidental structure never makes on its own.

The rise of private credit as an income strategy

Against that backdrop, it’s not surprising that private credit has become the asset class wealth managers keep returning to when the conversation turns to income. The US private credit market has grown from around $500 billion to roughly $1.3 trillion over the past five years, and is expected to more than double from here as institutional and private investors continue to look for yield outside traditional public bond markets.

The investor base doing the allocating has broadened well beyond the pension funds and endowments that built the asset class. High-net-worth and retail allocation to private credit, currently around $0.1 trillion, is projected to grow at close to 80% annually to reach $2.4 trillion by 2030. Roughly a third of family offices plan to increase their private credit exposure between 2025 and 2026, part of a broader shift away from relying on a traditional 60/40 portfolio as the sole source of diversification.

How semi-liquid structures actually work

Part of what has made this accessible to a wider audience is the growth of semi-liquid fund structures, principally interval funds and tender offer funds, which sit between a fully liquid public bond fund and a traditional ten-year private markets commitment. Assets in these semi-liquid credit vehicles have grown to roughly $230 billion, a meaningful increase from where they stood at the end of 2024, with credit-focused strategies remaining the most popular allocation within them.

The mechanics matter for anyone considering this route. Rather than allowing investors to redeem on demand, these funds typically offer subscriptions on a rolling basis but cap redemptions at somewhere between 5% and 25% of net asset value per quarter. That structure exists for a sound reason: it lets the manager avoid being forced to sell underlying loans at a discount simply to meet a wave of redemption requests, which protects the investors who remain in the fund. It also means the “semi” in semi-liquid deserves real attention before capital goes in, not after.

What liquidity really means in practice

A useful illustration came earlier this year, when a well-known European alternatives manager saw its shares fall sharply in a single session after gating redemptions on one of its private markets vehicles, a decision that rattled sentiment across the sector even though the manager held meaningful liquidity reserves and the gate itself was structural rather than a sign of distress. The fund wasn’t insolvent, and industry commentary was broadly consistent that the mechanism did exactly what it was designed to do. But the episode was a reminder that the protection built into these structures works by limiting an investor’s own access to their capital during the periods they might most want it. That is a feature investors need to understand and accept going in, not a flaw that only shows up when something goes wrong.

The part worth saying plainly

None of this makes the asset class risk-free, and cross-border fixed income planning done properly has to hold both sides of that at once.

Default rates and PIK usage

Headline default rates in private credit have stayed under 2% for several years, a figure that has done a lot of work in the asset class’s marketing. But once selective defaults and liability management exercises, effectively negotiated restructurings that avoid a formal default classification, are counted, the “true” rate is closer to 5%. Payment-in-kind usage has also risen across the sector, with public business development companies now receiving around 8% of their investment income in PIK, meaning paid in additional debt rather than cash. That isn’t automatically a problem, but it is a detail worth understanding in any manager or fund a client is considering, since it changes what “yield” actually means in practice.

Manager quality over yield chasing

The practical takeaway is that manager quality, underwriting discipline, and liquidity terms matter more in this environment than the headline yield figure on its own. A fund offering a materially higher return than its peers is very often compensating for something, whether that’s credit quality, structural leverage, or a liquidity mismatch that only becomes visible under stress. For cross-border families who are already thinking carefully about where their wealth sits, that same discipline needs to extend to how the income within it is actually generated.

What this means in practice for cross-border portfolios

For a purely domestic investor, most of the above is simply a question of picking the right fund. Cross-border fixed income planning carries a handful of additional questions on top of that choice for a UK expat holding assets across two or three jurisdictions, and they’re the ones that get missed most often.

Fund domicile matters as much as fund strategy. Where a vehicle is registered affects withholding tax treatment, what reporting an investor receives for their home and resident tax authorities, and how straightforward it is to hold within an existing estate planning structure rather than as a standalone asset sitting awkwardly outside it. Two funds with near-identical underlying loan books can produce materially different after-tax outcomes purely because of where they’re domiciled.

Currency exposure deserves the same scrutiny applied to the underlying credit. A dollar-denominated private credit allocation held by a family that actually spends in sterling or Hong Kong dollars carries a currency risk that is easy to overlook when the headline yield figure is doing the talking. That risk compounds with jurisdiction risk rather than sitting separately from it, since a family already managing exposure across UK, Gulf and Asian jurisdictions doesn’t need a fourth, unhedged variable layered on top.

And liquidity terms need to be matched to the reason the allocation exists in the first place. Capital earmarked for a near-term need, a property purchase, a change in residency, a school fee cycle, has no business sitting in a structure with a quarterly redemption cap of 5% of NAV. Capital that genuinely won’t be needed for several years is a different conversation entirely. Treating every allocation to the asset class as interchangeable is one of the more common mistakes we see in portfolios that arrive for review, and it’s the mistake proper cross-border fixed income planning is meant to catch.

Income now has to be chosen, not inherited

Put the two threads together, the jurisdiction question and the income question, and the read is consistent. The old defaults, hold cash, buy a ten-year bond, wait for the cut, were built for a rate environment that no longer holds, at least not on the timeline most portfolios assumed at the start of the year. Income now has to be sourced deliberately, structured with real attention to liquidity terms and manager quality, in the same way jurisdiction now has to be chosen deliberately rather than carried forward from what worked three years ago. That deliberate approach is the whole point of cross-border fixed income planning: replacing what was inherited by accident with a structure that was actually chosen.

If your income strategy still assumes rate cuts that keep not arriving, or still runs on structures set up for a different jurisdiction or a different decade, that assumption is worth reviewing properly before it costs you something.

Book a call with Annette Houlihan to talk through your cross-border income strategy.

This article is provided for general informational purposes only and does not constitute financial, tax or legal advice. It does not consider your personal circumstances and should not be relied upon as a basis for investment decisions. Carey Suen’s advisory services are available to qualifying high-net-worth individuals; eligibility criteria apply. Please seek independent professional advice before making any financial decision.