Durable income, rising dispersion and diverging global rate paths define today’s bond landscape. Our active investors across our fixed income platform highlight how selectivity across regions, sectors and maturities can drive alpha in 2026.
Fixed Income Outlook
Key takeaways
01.
The income advantage
Income is the dominant driver of fixed income returns today. We believe elevated yields present an opportunity to build higher quality portfolios anchored in durable income.
02.
The case for selectivity
Dispersion across markets and issuers is widening, making flexible and selective portfolio construction increasingly central to outcomes.
03.
Beyond the benchmark
Traditional benchmarks no longer capture the full opportunity set in fixed income. Intentional, global portfolio construction can unlock income and active return potential.
Bond market trends
After a year marked by policy divergence and shifting rate dynamics, fixed income enters 2026 with durable income and deepening dispersion at the forefront. Inflation has moderated, but labor softening and fiscal pressures continue to drive rate volatility. These macro forces are widening differences across regions and sectors and issuers—increasing the importance of selectivity and intentional portfolio construction.
Our active fixed income investors break down the trends shaping 2026 and where they see the most compelling income and alpha potential across global markets.
"Income very much did its job in 2025, and we don’t see any reason why today’s broad environmental conditions don’t suggest that it will be fruitful again in 2026."
Rick RiederChief Investment Officer of Global Fixed Income
The real gravity: labor, not inflation or growth
Rick Rieder, Chief Investment Officer of Global Fixed Income, sees labor market weakness—not inflation—as the dominant force shaping the outlook. With price pressures largely contained, labor softness is likely to drive Fed policy and keep income-oriented assets attractive.
Income delivered strongly in 2025, and Rick believes the backdrop remains supportive in 2026, creating opportunities to earn yield with limited duration risk.
“Steepening” out of cash
Tom Parker, Chief Investment Officer of Systematic Fixed Income, and Jeffrey Rosenberg, Senior Portfolio Manager, see the bond market at an inflection point as Fed easing pulls down short‑term yields while longer rates remain elevated.
This steepening has restored the advantage of stepping out of cash and into bonds. Shorter maturities now offer attractive income and improved diversification, while stable growth, low defaults and widening dispersion create selective opportunities for alpha.
Europe’s yield reset creates opportunity
Higher real yields, stronger credit fundamentals and steady inflows are restoring Europe’s appeal for fixed income investors. James Turner, Head of Global Fixed Income in EMEA, outlines why European markets now offer a compelling source of income and diversification as global policy paths diverge.
A stronger foundation meets a supportive cycle
Emerging markets debt enters 2026 on firmer footing, supported by improving fundamentals, healthier balance sheets and a more constructive macro backdrop. Real yields remain attractive, inflation is moderating and policy divergence is creating differentiated opportunities across countries and sectors. Michel Aubenas, Head of Emerging Market Debt, outlines why a stronger foundation and supportive cycle are enhancing emerging markets’ role as a source of income, diversification and selective return potential.
Dispersion turns into opportunity
Diverging policy paths across Asia are transforming dispersion into a source of opportunity for fixed income investors. Elevated real yields, improving fundamentals and increasingly favorable correlations are reshaping the region’s role in global portfolios.
Navin Saigal, Head of Global Fixed Income for Asia Pacific, explains how differentiated cycles across Asia are helping fixed income evolve from a diversifier into a potential return driver.
Selective strength in a shifting market
Municipal bonds enter 2026 on solid footing, supported by durable demand, manageable supply and sound credit fundamentals. While tighter valuations and volatility call for greater discipline, income remains the primary return driver.
Pat Haskell, Head of the Municipal Bond Group, explains why selectivity, structure and issuer level analysis are increasingly important to generating attractive, tax-efficient income in the year ahead.