PGIM’s Gregory Peters recently shared his outlook for global fixed income as markets confront sticky inflation, widening monetary policy divergence, and an AI-driven capex boom. The U.S economy continues to “muddle through”, while global growth dynamics are diverging again. The base case remains gradual normalisation toward neutral, and we see tail risks concentrated at the very long end.
Key Takeaways
- Carry remains the core driver of returns. All‑in bond yields compare favourably to equity and cash, a reversal from the post-GFC era.
- Diversification and defensiveness matter. AAA/AA CLOs, CMBS and ABS offer potential inflation resilience and attractive risk‑adjusted profiles, while global rates and policy divergence favour short‑duration over uncompensated duration risk.
- Selectivity and risk‑awareness are essential. Tight spreads no longer reward investors to overreach for risk—making multi‑sector resilience, income stability, and tactical positioning around volatility key for 2026.
Read on for key bond market themes, market outlook, and investment opportunities.
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