Andrzej Skiba, Head of US Fixed Income, BlueBay Senior Portfolio Manager, RBC Global Asset Management (U.S.) Limited, summarizes the market in 2025 for the asset class and gives his thoughts for 2026.
2025 was a rollercoaster, but ended positively for global investment grade markets, with strong returns driven by US Treasury rallies and credit spread tightening.
Markets recovered from April’s tariff-induced volatility through eased trade tensions, rate cuts, and US economic resilience.
2026 we see possible high single-digit returns, fuelled by accelerating US growth, elevated yields, spread compression, and potential central bank rate cuts, with carry income as a key contributor.
A core 2026 theme is balancing record credit supply (from M&A and AI-linked debt issuance) against investor demand, including several trillion in money market balances shifting into longer-term investments.
Return dispersion is expected to rise due to disparities in consumer health and business model viability, creating alpha opportunities for active investors.
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It’s been a rollercoaster ride for global investment grade investors in 2025. It’s ending, however, on a positive note. Strong positive total returns were helped by both a rally in US Treasuries as well as by a tightening of credit spreads across all markets, in some cases to multi-year lows.
Back in April, when President Trump announced aggressive trade tariffs, a complacent market gasped in disbelief, sending asset prices lower across the board. Since then, a clear easing of trade tensions, the passing of the US budget, rate cuts across both sides of the Atlantic and a resilient US labor market and the economy helped to reverse all of these losses.
As we look towards 2026, we see a strong total return outlook ahead, helped by accelerating US growth, still elevated yields, spread compression and a potential for more central bank rate cuts. We see high single digit returns in dollar terms as a possibility, with the bulk of the number coming from carry income based on the current yield of the asset class.
A key theme for 2026 is likely to revolve around record credit supply and questions whether that can be matched by record investor demand. On the one hand, we see record M&A issuance coupled with exploding AI-linked debt supply. On the other, we expect some of the $7 trillion money market balances being invested further out the curve, helping to balance the market.
Finally, we expect to see an increase in return dispersion across the credit markets as investors reflect on disparities in the health of US consumers across the income cohorts and some business models facing acute secular challenges. This is great news for active investors as, beyond themes like compression, generating alpha could be to do with identifying haves and have nots across our investment universe.
As we look towards 2026, we see a strong total return outlook ahead, helped by accelerating US growth, still elevated yields, spread compression, and a potential for more central bank rate cuts. We see high single-digit returns in dollar terms as a possibility, with the bulk of the number coming from carry income based on the current yield of the asset class.
Featured speaker:
Andrzej Skiba, Head of US Fixed Income, BlueBay Senior Portfolio Manager, RBC Global Asset Management (U.S.) Inc.