High-Yield Bonds

Many debates in defined contribution (DC) circles focus on fees, new asset classes, and ever more complex solutions. But the biggest improvement available to plan participants may come from something far simpler: how their fixed income is managed.

California continues to demonstrate fiscal resilience, supported by strong liquidity balances and the absence of projected cash‑flow borrowing through FY 2026–27. However, Medicaid cost pressures, a progressive tax structure highly sensitive to equity market swings, and constitutional spending constraints remain key differentiators between California and other large states.

Chris Galipeau discusses high-conviction insights that go beyond media headlines.

Private credit is more inherently complex than the traditional bond market. In comparison, private credit information comes at a deficit. That’s because private credit loans are essentially bespoke agreements between a lender and a private borrower.

Private markets (private equity, private credit and real estate) have historically delivered an “illiquidity premium”. Institutions and family offices have recognized this illiquidity premium and have historically allocated significant capital to capture it.

In this second quarter update, Western Asset believes global fixed-income markets face a more complex backdrop as geopolitics, rapid AI adoption and private credit scrutiny intersect.

Chasing performance by deviating from a benchmark has long been the hallmark of active managers. But it may be time for a rethink. Our research suggests that investors allocating to core equities should consider refreshing the criteria they use to identify portfolio managers that can consistently beat their benchmarks.

By moving beyond benchmark constraints, active portfolios can access off-the-run bonds, specific securitized tranches, and maturity buckets with superior risk-reward profiles. They also have the flexibility to adjust positioning throughout the market cycle — reallocating across sectors, ratings, and issuers as conditions evolve to capture opportunities and mitigate drawdowns.

Stephen Dover shares key insights from the Franklin Equity team about how artificial intelligence is changing the economics of the software industry.

Emerging markets (EM) are using low-cost renewables to cut fuel imports, stabilize power costs and improve energy security—positioning EM as the growth engine of the energy transition. Countries and companies that leverage their dominance in critical minerals and green technology could pull ahead, creating dispersion in potential outcomes for investors.

Chris Galipeau discusses high-conviction insights that go beyond media headlines.

Tax-equivalent yields on high-quality munis are hitting 7% to 9%. Discover how WisdomTree ETFs, WTMU and WTMY, exploit the steep yield curve.

First quarter 2026 earnings were stronger than expected and we think that there might be continued strength in the second quarter, unless there is a major macro shift.

With tensions simmering in the Middle East and the global economy feeling the pinch of high energy prices, high-yield bonds might not be on every investor’s radar. In our view, they should be.

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.