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Global bond markets are entering a new phase. While the US yield curve could continue to steepen in 2026, Europe is expected to remain more stable. At the same time, emerging markets stand out with high real yields and attractive interest-rate dynamics. “For yield-oriented investors, this creates numerous opportunities to enhance portfolio performance,” says Thorsten Fischer, Managing Director and Head of Portfolio Management at Moventum AM.

Trade conflicts, geopolitical tensions, rising public debt, weakening momentum in the United States and a sluggish recovery in Europe – the global economy is facing no shortage of challenges. One issue, however, has temporarily receded: inflation. Owing to the longest government shutdown in US history, the latest US inflation data were released with a delay and should also be interpreted with caution. “Parts of the underlying data had to be estimated or could not be collected at all, which is why economists regard the figures as uncertain,” Fischer explains. Nevertheless, both headline inflation (2.7 per cent) and core inflation (2.6 per cent) in the United States have declined noticeably in recent months, with housing costs in particular weighing on price pressures. In the euro area, price stability prevails and inflation expectations remain well anchored.

Driven by weakness in the labour market, the Federal Reserve cut its policy rate in December to 3.50 - 3.75 per cent and signalled further moderate easing in 2026. Markets are currently pricing in as many as three additional rate cuts. In the euro area, by contrast, the central bank sees no immediate need for action, as the interest-rate cycle that began in 2024 is drawing to a close.

For fixed-income securities, this implies that the US yield curve is likely to steepen further – with the short end moving lower due to Federal Reserve rate cuts, while the long end remains stable or even moves higher amid concerns about the debt situation. As a result, long-dated government bonds are likely to remain particularly vulnerable, as even moderate yield increases can lead to disproportionate price losses. “We find positions in the middle segment of the curve (three to five years) or at the short end (one to three years) attractive, as they are likely to benefit from rate cuts while maintaining a manageable risk profile,” says Fischer.

Risk premia on US high-yield bonds have meanwhile normalised significantly, with spreads of around 317 basis points now slightly above the level seen at the start of the year. “Solid fundamentals among many issuers and continued strong investor demand support the segment,” Fischer explains. Yield levels of around 6.5 per cent remain attractive – particularly for investors who do not expect an economic slowdown.

US investment-grade (IG) bonds also present a solid picture. Spreads of around 51 basis points signal a broad normalisation, while yields of approximately 4.8 per cent make the segment tactically relevant. “For yield-oriented investors, IG corporate bonds can, in selected cases, represent an alternative to US government bonds without the need to move directly into higher-risk asset classes,” Fischer notes.

Turning back to Europe, the attractiveness of German government bonds remains limited from an investor perspective. At the short end of the curve, the stable monetary policy stance of the ECB provides little fresh impetus from rate cuts. At the long end, structural upward pressures persist. Increased supply driven by government spending programmes is meeting more selective demand from international investors. As a result, yields on ten-year German Bunds remain susceptible to further mild upward pressure or stabilisation at elevated levels. Elsewhere in the euro area, government bond yield curves also largely exhibit a steadily rising profile with a tendency towards steepening. “This makes short to medium maturities – the ‘belly’ of the yield curve – appear more attractive overall,” Fischer says.

In the euro corporate bond market, risk premia remain tight: investment-grade spreads stand at 52 basis points, while high-yield spreads are around 252 basis points. The high-yield segment remains the more attractive investment area with yields of approximately 5.5 per cent, but it requires active risk management. Investment-grade bonds, by contrast, are increasingly serving as a defensive anchor within portfolios.

Genuine opportunities for additional returns can be found in emerging market bonds. These currently benefit from three key factors: high real yields, a weaker US dollar and the prospect of interest-rate cuts across many emerging economies. This comes as no surprise, as numerous emerging market central banks tackled inflation at an early stage and now have greater monetary policy flexibility. “Emerging market bonds, particularly in local currencies, currently offer an attractive overall package,” Fischer explains, “combining high real yields, potential currency gains and favourable interest-rate dynamics.” At the same time, careful country-specific risk management remains essential.