Roy Keenan: 6% and sleeping well in the best market I’ve seen

Please note, this interview was filmed Wednesday 25 February 2026

I've had the good fortune to interview Yarra Capital Management's Co-head of Fixed Income, Roy Keenan, many times in my tenure at Livewire. 

He has never struck me as a person prone to exaggeration or hyperbole, so when he tells me that the opportunities in his part of the market are the best he's ever seen, I sit up and take notice. 

Keenan has been refining his craft for more than two decades - through the GFC, the eurozone crisis, the zero-rate era, COVID dislocation and the fastest hiking cycle in modern history - and carries with him an enviable record of consistency and outperformance. He's survived the bad and enjoyed the good times, yet this moment, he says, stands apart.

“I think it’s the best shape I’ve seen fixed income, and particularly credit markets, in my time.”

This, no less, at a time when equity investors are struggling with valuations and ricocheting uncertainty, private credit is starting to show some cracks, and AI-disruption threatens to tip over the apple cart and throw out the baby. 

For Keenan and Yarra's fixed income team, the backdrop heading into 2026 is not one of fragility but of structural improvement. Deeper markets. Better liquidity. More issuers. And crucially, yields that offer genuine income without requiring heroic risk. As Keenan has always told me, when he's taking risk, he wants to get paid appropriately for it. 

In the interview above, Keenan explains why Australian credit markets are evolving rapidly, how he is positioning portfolios across duration and quality, and why he believes investors may be underestimating the opportunity set in fixed income.

For the full experience, watch the video above, or read an interview summary below. 

INTERVIEW SUMMARY

A market conditioned to volatility

A year ago, Keenan highlighted Trump as the dominant macro force. That call proved accurate. But today, he believes markets are more conditioned to political volatility.

“It is still Trump,” he says, “but the market is almost predicting what his next move is.”

The bigger domestic swing factor, in his view, is the RBA. Yarra’s house view is that the recent tightening is likely a one-off, with cuts later in the year. Importantly, markets are already pricing further tightening. That asymmetry matters.

“The opportunity is what if they don’t tighten,” Keenan says. “That’s where the opportunity to actually add value to the funds resides".

Rather than positioning for dramatic macro calls, Yarra is calibrating portfolios to benefit if the market has overreached.

Why fixed income has rarely looked better

Keenan’s optimism is a reflection of some of the structural forces impacting credit and fixed income markets. 

Over the past 12 months, capital has flowed into Australian credit markets, supported by a weaker US dollar and growing geopolitical discomfort with US policy settings. Asian participation in primary issuance has surged, lifting liquidity and broadening demand.

At the same time, Australia’s credit market has grown in scale and depth. More issuers are coming to market. Tenor is extending. The opportunity set is expanding.

When Keenan turned the calendar to the new financial year, something stood out. Despite credit spreads tightening, outright yield opportunities were broadly similar to the year before. Higher base rates had offset spread compression.

“I looked at that and thought, well, the yield opportunity is exactly the same as 12 months ago,” he says, highlighting that conditions remained strong and hadn't deteriorated. 

That combination of reasonable spreads and elevated base rates means investors can secure 5-6% investment grade yields without reaching excessively down the risk spectrum.

Private credit and the risk of compression

Not all segments look equally attractive, however, according to Keenan. 

The rapid growth of private credit, particularly following APRA’s decision to phase out AT1 issuance, has created large pools of capital seeking deployment. In some sub-segments, that has compressed spreads materially.

“We’ve seen 100 to 200 basis points compression in parts of the market,” Keenan notes, adding that the issue is not that private credit is inherently flawed. It is relative value.

“You assess the risk and you’re not getting paid enough return for the risk.”

In segments where the illiquidity premium has shrunk, Yarra is stepping back. Liquidity risk becomes particularly relevant if inflows reverse and managers are forced sellers of illiquid assets.

That dynamic reinforces a core principle Keenan repeats often: get paid appropriately for the risk you take.

Rotating down the curve

Within portfolios, the team has been active. Participation in primary issuance has been strong, reflecting a busy start to the year.

One clear shift has been reducing longer-dated major bank Tier 2 exposure after significant spread tightening over the past year. Instead, Yarra has rotated toward shorter-dated, high-quality paper.

“We decided to move out of that and rotate down the credit curve,” he says.

Two to three-year fixed-rate Tier 2 securities offering yields around 5% have been attractive, particularly if further RBA tightening does not eventuate.

At the same time, the growing corporate hybrid market, including issuers such as AusNet, has expanded the investable universe. More supply, in this case, means more selectivity and diversification.

Retail dynamics are also reshaping demand. With baby boomers transitioning from wealth creation to income generation, longer-dated bank securities offering yields north of 6% are finding strong support.

“If I was sitting back as a retail investor, it looks pretty attractive,” Keenan says.

6% investment grade and upside from there

Ultimately, Keenan returns to first principles. Bottom-up credit fundamentals in Australia remain solid. Corporate balance sheets are generally in good shape. Reporting season, from a credit perspective, has been robust.

“Picking up a 6% handle investment grade credit, which is where our funds are at the moment, it’s pretty compelling," he says.

He believes that with active management, total returns over the next 12 months could exceed that running yield.

The biggest risk? A sharp equity drawdown that tempts capital to rotate aggressively out of fixed income and back into cheaper equities.

Absent that scenario, he sees a favourable risk-reward setup.

“It’s probably the best I’ve seen markets,” he reiterates. “It’s providing a lot of opportunities for us.”

For an asset class that many declared dead only a few years ago, that is a striking endorsement.

Managed Fund

Yarra Enhanced Income Fund

Australian Fixed Income

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