Payden & Rygel: Continued opportunities in global bonds
Despite heightened geopolitical uncertainty, persistent inflation concerns, and shifting global growth expectations, global fixed income markets continue to present compelling opportunities for long-term investors, according to a new market commentary.
In the commentary, “Why Bonds Still Look Attractive in a Volatile World,” Paul Saint-Pasteur, Director and Global Fixed Income Strategist, explains that today’s higher-yield environment has restored fixed income’s ability to generate attractive income and diversification benefits for investors willing to maintain a medium- to longer-term horizon.
“Fixed income can once again generate healthy income through carry, meaning investors no longer need to rely solely on falling yields and capital appreciation to generate returns,” said Saint-Pasteur. “While near-term volatility is likely to persist, elevated starting yields create a far more compelling entry point for bond investors than we’ve seen in years.”
Saint-Pasteur noted that while Payden & Rygel has modestly lowered its global growth expectations and increased the probability of stickier inflation scenarios, the firm’s overall economic outlook remains constructive. The U.S. economy continues to benefit from AI-driven investment and gradually moderating inflation, while Europe and the U.K. face greater pressure from higher energy costs and slower growth.
The commentary emphasizes that the current environment favors active management and careful security selection over broad market exposure. According to Saint-Pasteur, regional and sector divergences are becoming more pronounced, creating opportunities for active fixed-income managers.
Among the firm’s current areas of focus are:
- High-quality core bonds that can provide income and portfolio resilience
- Shorter-maturity bonds offering attractive carry and lower duration risk
- Selective opportunities across credit sectors and regions
- Emerging market debt especially local currency debt, which offers attractive yields and diversification benefits
At the same time, Payden & Rygel maintains a cautious stance on longer-duration bonds, where fiscal risks may be underappreciated, as well as lower-quality issuers facing significant structural disruption.
Saint-Pasteur also addressed recent concerns about bonds moving more closely with equities, noting that inflation-driven volatility has temporarily altered traditional stock-bond correlations. Over time, however, the firm expects fixed income to regain its historical role as a portfolio diversifier as inflation pressures and geopolitical uncertainty stabilize.
“Today’s market environment reinforces the importance of generating income, maintaining diversification, and preserving capital,” Saint-Pasteur said. “We believe the global bond universe offers a rich opportunity set for active investors capable of navigating increasing dispersion across markets.”