Stability, current income and selective opportunities

Government bonds

The performance of government bonds continues to be strongly influenced by monetary policy and inflation expectations. The speed of interest rate cuts and whether they will be continued at all depends on the data. Yields have recently stabilized after falling significantly in the run-up to the cuts. US Treasuries continue to offer attractive real yields and act as a key diversifier in an environment of heightened uncertainty. In Europe, core countries are benefiting from defensive capital flows, while peripheral bonds are selectively delivering additional yield but remain politically more vulnerable. Overall, duration is becoming more important again, particularly as a hedge against economic downturns.

Investment grade bonds (IG)

Investment grade bonds remain robust. Companies have solid balance sheets and sufficient liquidity, which means that refinancing risk remains limited despite higher interest rates. Spreads remain tight and reflect the good fundamental situation, but offer only a limited additional buffer in the event of an economic slowdown. At the same time, all-in yields remain attractive, particularly in the European market. IG bonds therefore continue to play an important role as a stable yield provider in the portfolio and are suitable for a slightly higher duration in the current environment.

High yield bonds (HY)

The situation in the high yield segment remains divided. While yields still appear attractive, spreads are historically narrow, which reduces the risk premium. The fundamental situation is solid in the upper rating segment, but pressure is increasing on weaker issuers, particularly in the CCC segment. Default rates are likely to rise slightly, but remain moderate by historical standards. The focus should therefore clearly be on higher-quality segments such as BB and selected B securities. Overall, high yield remains a tactical addition that should be used selectively and in a quality-oriented manner.

Emerging markets bonds (EM)

Emerging market bonds continue to benefit from attractive yield levels and, in some cases, advanced interest rate reduction cycles. The key question is whether the yield is sufficient compensation for the risk taken. At the moment, the answer is no.

Mimi Haas, Lic. rer.pol. HSG, M.A. in Banking and Finance HSG, Partner

_{Sources: MarketMap, Bloomberg and DWS}

_{As of: 25.03.2025}