Payden & Rygel: Corporate bonds well-positioned going into 2026

20 januari 2026

Obligaties

By Natalie Trevithick, Managing Director, Payden & Rygel

In 2025, US investment-grade corporate bonds posted a total return of 7.8%, and we believe they could deliver another year of compelling returns in 2026.

The current yield on the Bloomberg US Corporate Bond Index is 4.8%. While spreads remain tight over similar-maturity Treasury bonds at around 80 basis points, they do provide a nice pick-up in overall yield without taking on much incremental risk given the average credit quality of the index is A-.

For 2026, we believe IG Corporates have an attractive return potential that can be achieved by simply earning the current yield on the bonds and bolstered even further if underlying interest rates were to fall.

Plus, corporate bonds are a great way to add diversification and a stability component to a broader portfolio. This is an effective way for investors to balance out some of their more volatile equity allocation.

Corporate balance sheets are generally in a healthy position, and we are beginning to see an improvement in leverage metrics. The impact of tariffs has been quite manageable for most companies, and in general, there is a bullish tone for 2026 performance.

For instance, Broadcom was one of the first companies to come to the debt markets this year and they brought a $4.5 billion deal, which was met with over $27B of demand. But what was most interesting, is that the largest demand was in the 30yr maturity which came at a yield of 5.7%. This is a single A rated issuer, so to some investors this can be viewed as a compelling low-risk investment, particularly if you think the Fed still has a few rate cuts up their sleeves for this year.

We also see value in the high-yield market. In 2025, the Bloomberg US Corporate High Yield Bond Index returned 8.6% and currently yields are at 6.6%. We are cognizant of the incremental risk you are taking by going down in credit quality, which is why careful credit selection is key. Plus the differential between investment-grade and high-yield bond yields are near their tightest levels in recent history.

Overall, we have a constructive outlook for fixed income assets broadly in 2026. We see them offering an attractive value component to a portfolio, and tend to be less reactive to the day-to-day news cycle that impacts equity markets. In addition, we believe they are well-positioned to deliver attractive returns in the year ahead.