Allianz Global Investors has published its outlook for 2026. The asset manager’s experts see a favorable environment for bond investors – with opportunities in various regions.
• Allianz Global Investors sees an overall favorable environment for bond investors in 2026
• Experts expect further interest rate cuts in both the USA and Europe
• Diversification across regions and instruments is cited as the key to success
Favorable environment despite uncertainties
Global growth is expected to remain resilient in 2026, supported by broadly pro-growth monetary policies in major economies. As Allianz Global Investors writes in its annual outlook published on November 25, 2025, central banks in developed markets are expected to have normalized their key interest rates to neutral levels after the aggressive tightening cycle of previous years. Meanwhile, fiscal policy remained accommodative as governments prioritized infrastructure and strategic investments.
This combination of growth and inflation creates an overall favorable environment for fixed income investing, said Jenny Zeng, CIO Fixed Income at Allianz Global Investors. However, the expert expects divergences in growth and inflation dynamics as well as in the monetary policy paths of different regions. This opens up opportunities for selective positioning in duration and credit in actively managed portfolios.
Divergent monetary policy as an opportunity
When it comes to monetary policy, Allianz Global Investors sees clear differences between developed markets and emerging markets. In the US, the asset manager expects the Federal Reserve to cut interest rates towards 3 percent, while the European Central Bank is likely to go below 2 percent. Given a very restrictive fiscal policy, the Bank of England could cut even more than currently priced in.
In the emerging markets, despite a slowdown in disinflation, several central banks still have scope for further easing due to positive real interest rates. Countries such as Brazil, Mexico, India and South Africa are positioned for gradual interest rate cuts, which should support the performance of local currency bonds.
Tight spreads require vigilance
According to Allianz GI, corporate bond spreads remain historically tight – a sign of robust fundamentals and strong technical factors as investor demand increases. Nevertheless, in view of the late-cycle dynamics, cracks can be seen that urge caution. There are signs of stress in interest rate-sensitive sectors and lower quality issuers with more aggressive accounting practices are beginning to fail.
The systemic risk is currently low because the banks have solid fundamentals. Still, valuations left little buffer against macroeconomic shocks. Jenny Zeng emphasizes: Vigilance is required in this environment, but it is too early to forego carry strategies.
Active management and diversification as key
Allianz Global Investors formulates three key recommendations for bond investors: First, active management is crucial, as tight spreads and asymmetric risks require rigorous credit selection and dynamic allocation. Second, there are benefits to diversification across regions – developed markets with duration for resilience, emerging market bonds for spreads and diversification. Thirdly, liquidity and risk control are important in order to maintain flexibility in the event of possible disruptions caused by political surprises or geopolitical shocks.
The asset manager cites emerging markets and Asia as particularly attractive medium to long-term investment targets due to structurally improved macroeconomic fundamentals. Investors should also consider diversifying across different instruments – such as floating rate bonds, high-quality securitized loans and convertible bonds as an addition to income-generating multi-sector portfolios.
D. Maier / editorial team finanzen.net
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