High-Yield Bonds

High-growth technology stocks still dominate the investment landscape, fueled by the promise of AI. But recent signs of a broadening market are revealing that more industries beyond just tech are positioned to benefit. We think large-cap value stocks are well-poised for this shift, especially since AI can be both a disruptive and driving force in today’s dynamic market.

Yields for preferred securities have generally risen more than corporate bond and long-term Treasury yields over the past few months, making them more attractive to investors.

Stock markets have been hitting all-time highs and credit spreads remain low, yet higher interest rates and mounting floating-rate debt are straining lower-rated borrowers. This tension is surfacing first in leveraged loans as “quiet defaults” become more common — opening up a dynamic set of opportunities for investors specialized in stressed and distressed assets.

April delivered a constructive backdrop for preferred securities, with the ICE BofA Fixed-Rate Preferred Securities Index rebounding 2.23% and bringing YTD returns back into positive territory at 0.8%.

Artificial intelligence (AI) leadership is no longer a developed-market monopoly. Emerging markets (EM) now have their own AI champions, and productivity gains may follow. For bond investors, we expect the implications to differ by country—driven by industry composition, capital intensity, digital infrastructure and speed to adoption.

Access to private equity, private credit, private infrastructure, and private real estate assets can potentially improve long-term investment outcomes for participants.

Get ready each week with high-conviction insights that go beyond media headlines.

In this month’s Allocation Views, the Middle East conflict and its impact on the global economy in 2026 continue to be the chief concern for asset allocation, as inflationary pressures challenge central bank policy.

The complication is that the ceasefires stopped the escalation without resolving the underlying disruption. The Strait of Hormuz, which carries roughly 20% of global oil supply, remains effectively closed. Oil prices fell sharply on the ceasefire announcements (including the largest single-day decline since 2020), then climbed back above $100 per barrel.

Get ready each week with high-conviction insights that go beyond media headlines.

In today’s market, income investors remain firmly focused on one objective: yield. With traditional sources of income still under pressure, demand for high-income ETFs continues to grow — especially those capable of delivering consistent monthly payouts.

Markets and observers weren’t surprised when the Federal Reserve held its policy rate steady at the April meeting. More notable, in our view, were the three dissents by voting participants who did not support keeping the implicit easing bias in the policy statement’s forward guidance language.

The European Union (EU), pursuing ambitious decarbonization goals, is significantly recalibrating its emissions compliance regime with the Carbon Border Adjustment Mechanism (CBAM). This new border tax intends to promote fair competition amid varying emissions rules and costs. Our research suggests it could also offer insight into profitability as the rising costs to meet carbon limits weigh on corporate financial health, creating winners and losers.

In a recent (unscientific) Franklin Templeton social media poll, we asked investors what they felt was the biggest risk to the global economy over the next 12 months. Nearly half (45%) of respondents highlighted high oil prices as their greatest fear factor.

As multi-asset income investors, we seek to help a wide range of clients meet their income needs. The benefits of an income-centric approach are especially relevant for investors as they enter retirement – and that’s especially true today. We bring that to life with two case studies.

A quarterly report providing an in-depth analysis of the global economic landscape, key drivers and insights into fixed-income markets for investors.

Sentiment toward BDCs – funds that invest in small and midsize private U.S. businesses – has improved since early March. BDC bond spreads have stabilized and outperformed the broader investment grade (IG) index, suggesting credit investors are increasingly comfortable with downside risk.

Global Head of Securitised Products John Kerschner and Portfolio Manager Ian Bettney from Janus Henderson’s Global Securitised Team examine how CLOs and other securitised credit have weathered recent volatility, and why selectivity and active management remain central to capturing opportunities across the market.

Despite the turbulence, the global LCC market remains an enormous force. Four of the world’s 10 largest airlines—Ryanair, Southwest, IndiGo and easyJet—operate on a low-cost model. The broader budget travel market is projected to exceed $315 billion by 2028, according to Statista.

When advisors and investors hear the terms “high yield” or “junk” as it relates to bonds, they understandably have some apprehension. After all, junk bonds carry elevated credit risk relative to their investment-grade peers. Hence the higher yields, which act as added compensation for the extra risk.

Fixed-income market sentiment was dominated by geopolitical headlines, particularly the conflict in the Middle East following disruptions to the Strait of Hormuz and rising oil prices, which contributed to renewed inflation concerns.

LPL Research examines the fixed income space as global bonds broaden yields and reduce U.S. concentration, offering diversified income and resilience via non‑U.S. developed and emerging markets.

As always, I hope you’re having a good 2026 and that all is well with you, my readers, and your family and friends. Here’s my latest.

While Russ acknowledges that the ongoing conflict in the Middle East has contributed near-term volatility, he also notes that these rising tensions are occurring against the backdrop of a solid U.S. economy.

Get ready each week with high-conviction insights that go beyond media headlines.

Oil shocks hitting economies with weak demand and strained balance sheets are especially damaging. Firms cannot fully pass on rising costs, so margins shrink, layoffs increase, and investment falls. Tightening monetary and credit conditions would cause inflation to fade faster but job losses, failures, and fragile household finances to be much worse.

Much of the conversation around private credit versus public high yield focuses on yield levels, default expectations and headline volatility. But we think what matters most is how each market lets investors measure, manage and reprice risk as conditions change.

Technology is transforming bond investing, across research, trading and—through optimizers—portfolio construction. We believe optimizers based on advanced digital investment platforms have a major advantage—and can create new levels of insight for portfolio managers that have them.

Despite a confluence of economic shocks in the first quarter, markets have held up remarkably well, but cracks appear to be forming beneath the surface.

The general field called “credit” has seen massive innovation over the course of my career. An Oaktree colleague asked me about the developments that brought the credit sector to where it is today. I came up with the following list.

March 2026 was a rough month for financial markets. Broad indexes experienced large selloffs, led by international stocks, though many of these still remain up in 2026. The dollar rallied strongly, breaking its year-plus downtrend.

Oil prices are the key transmission channel, and how far they rise and how long they remain elevated could shape the outlook for growth, inflation and policy, with implications for bond markets.

Get ready each week with high-conviction insights that go beyond media headlines.

Discover why Strait of Hormuz disruptions extend beyond oil, how supply shocks are transmitting into agriculture markets, and what third-order commodity effects may mean for portfolios.

As portfolios limited to public equities capture a smaller slice of corporate growth, private investments are increasingly finding a place in long-term wealth-building strategies, including 401(k)s.

In February, market sentiment was shaped by escalating US-Iran geopolitical tensions and sector-specific selloffs driven by concerns about AI’s potential disruption to existing business models.

In this month’s Allocation Views, healthy earnings growth is disguising a bifurcation that has resulted in particularly challenging earnings expectations for large-cap growth stocks in 2026.

In this article, Russ Koesterich notes the year-to-date strength of both cyclical and defensive stocks, a pairing that seems too strange to last.

For the second time in less than a year, the United States is engaged in military conflict in the Middle East. And once again, investors must assess how escalating tensions could affect markets.

Volatility spiked as investors questioned the Federal Reserve's next move, adding to existing concerns about private credit markets. Here's why investors shouldn't overreact.

At these levels, valuations are stretched, leaving investors with little potential upside and increased vulnerability to spread widening. In our view, such an environment warrants a shift toward high-quality assets.

On February 27, 2026 the United States and Israel launched a coordinated strike on Iran’s leadership, killing Ayatollah Ali Khamenei and many of the leadership team. Since the initial attack, a torrent of strikes has continued, designed to take out Iran’s ballistic missiles and leadership apparatus.

February data shows investors abandoning growth strategies for cyclical sectors as value funds attract $15 billion in new assets.

For over a decade, the narrative surrounding emerging market (EM) debt has been dominated by a single, overpowering force: the United States Dollar. As the greenback surged from the mid-2010s through the early 2020s, investors seeking yield in emerging markets largely sought shelter in "hard currency" debt—bonds issued by emerging nations but denominated in U.S. dollars.

Relying on the kindness of strangers has never been a good business or investment strategy, but it doesn’t mean that people don’t wish that it worked. The main issue with this hope is that it’s foolish to believe that other people’s grace and money will always be there.

Recessions are a regular part of the economic cycle, which means planning ahead is essential. You can't control the economy, but you can take steps to help protect your savings, manage debt, and keep your goals on track. Here are some smart ways to prepare when the economy shifts.

Stocks were choppier in January, but most areas of the market showed gains. The one laggard was large-cap growth, which was strong in recent years and for most of 2025, but trailed other stock indices.

While the equity market has its well‑known “January Effect,” credit markets also show a seasonal pattern. Looking back over nearly three decades of data, January tends to be one of the better months for corporate bond spreads.

As the artificial intelligence (AI) transformation unfolds, Portfolio Managers Denny Fish, John Lloyd, and John Kerschner share their views on equity valuations, identifying the next wave of winners, and the impact on fixed income markets as companies aggressively raise capital to finance the AI boom.

Get ready each week with high-conviction insights that go beyond media headlines.

Income rather than price is the primary driver of FRN returns. As policy rates and SOFR move, FRN coupons adjust accordingly, allowing income to rise in higher-rate environments and decline when rates fall.

It can sometimes be hard to tell whether the US housing market is hot or cold. Currently, existing-home inventory is tight and prices are stable—indicators of a hot market—while sales volume is down and home price appreciation has slowed. So, what’s the temperature?

Municipal bonds have posted strong performance so far this year, despite a news cycle that has many investors questioning the path forward.

Emerging-market (EM) corporates have a track record of resilience across market cycles. For over a decade, EM corporate bonds have allowed for participation in rising markets, while exposing investors to less downside during market downdrafts.

Private credit has been in the news lately. That’s nothing new. For years, investors have read about the potential opportunities the asset class offers and how it works. Let’s dig a little deeper into what private credit is, what it isn’t and how it can fit into a diversified investment portfolio.

In this article, Russ Koesterich discusses the merits of continuing to hold tech companies while also exploring diversification outside of the sector.

While occasional bouts of volatility are likely, we expect the fixed income markets to provide ballast for portfolios and are likely to deliver solid returns in 2026.

Income investors face a promising landscape today. But we think income investing should be more than simply combining the highest yielders in each asset class, which could create unintended risks. In our view, an efficient multi-asset approach can help find the right balance between income, growth and diversification.

Markets may appear orderly heading into 2026 — but beneath the surface, risk and opportunity are becoming increasingly uneven.

Equity valuations are top of mind among investors as we move into February, amid stretched sentiment and positioning and challenging corporate earnings expectations.