A better way
to invest in credit

Do oil price shocks push bond yields higher—or lower? Historical evidence shows that the answer depends less on the shock itself than on the macroeconomic regime in which it occurs. Understanding this distinction is key to interpreting the current market reaction to the Iran-related oil shock.

The corporate bond markets in 2025 were characterised by volatility in March and April, followed by a rally for the rest of the year that brought spreads down to relatively low levels. Dr Harald Henke, Principal Investment Strategist Fixed Income, examines how systematic credit factors performed in 2025 and what can be expected for factor performance in 2026 in the current market environment of low spreads.

Comparing fixed income performance is more complicated than it appears. Differences in duration, spread or credit risk can dominate returns, making it difficult to tell whether apparent outperformance reflects genuine security selection or simply higher risk exposure.

The year 2025 was characterised by rising interest rates and declining credit spreads. Based on current spread and yield levels, what returns can be expected from corporate bonds in 2026?

While the US is supporting the economy with falling key interest rates, the rate-cutting cycle in the eurozone has come to an end – despite uncertain outlook. Corporate bonds could benefit from the rising risk associated with sovereign issuers.

Credit spreads are currently low measured against government bonds. However, this does not necessarily mean that corporate bonds are unattractive: the risk differential between corporate and government bonds has narrowed due to the increasing challenges faced by the public sector, which justifies lower spreads. A comparison with the swap curve supports this interpretation.

Meta and Alphabet/Google recently entered the corporate bond market with two jumbo issuances. Will the projected AI capex of the large US tech companies make them index heavyweights in corporate bond benchmarks? Will the increase in debt be accompanied by rising company spreads? Do investors need to adjust their benchmark choice or investment universe?

Geopolitical tensions, fiscal risks and diverging interest rate policies were shaping the bond market in the third quarter of 2025. While the US Federal Reserve is starting a cycle of interest rate cuts, European countries are coming under increasing pressure. Corporate bonds are proving to be an anchor of stability in a complex market environment, as Dr Harald Henke explains.

Enhanced strategies provide investors with an efficient way to target outperformance without deviating significantly from benchmark risk. Quoniam offers an ideal combination of science-based models, powerful technical infrastructure and capital market expertise. This enables investors to invest close to the benchmark while aiming for controlled outperformance.

Fixed income factor investing is on the rise, yet many bond investors still haven’t explored it like equity investors have. Our new white paper peels back the layers of factor-based corporate bond strategies to show you where untapped sources of return may lie.