2026 Market View: Macro Outlook

Dec 04, 2025

Mark Dowding, BlueBay Chief Investment Officer, summarises the market in 2025 for Macro Fixed Income markets, and gives his thoughts for 2026.

  • US fixed income markets thrived in 2025, with Treasuries rallying significantly due to declining interest rates throughout the year. Robust US economic growth supported corporate credit outperformance, driving tighter spreads in both investment-grade and high-yield bonds.
  • European markets struggled as Germany’s fiscal expansion plans pushed Bund yields higher, steepening yield curves and weighing on index returns. French sovereign spreads deteriorated amid persistent fiscal challenges and political volatility, though spread movements remained contained ahead of 2027 elections.
  • In the UK we've seen longer-dated gilts struggle against a backdrop of uncertainty around policy credibility, despite Bank of England rate cuts contributing to a steeper yield curve.
  • In contrast, Japan’s economic strength led the Bank of Japan to raise rates, with new PM Sanae Takaichi’s reflationary policies pushing yields higher and steepening the curve. A reminder that policy and politics can be a major driving force in fixed income markets.
  • Global financial markets remained relatively stable despite Trump’s tariff policies, avoiding major disruption from trade tensions leading the US dollar to trade sideways for much of 2025.
  • For 2026, US economic momentum is expected to continue, with billions expected to be invested in AI, tax cuts, and deregulation, alongside resilient growth and rising inflation.
  • European markets are projected to remain subdued, with weak economic conditions and limited rate cuts.
  • Credit markets are favoured for carry income, with opportunities in subordinated financials and high-quality CLO tranches.
  • Japan and the UK are highlighted as markets prone to macro/political volatility, offering active management opportunities.


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