Entering the Fall 2026 | Who Buys the Bonds?

The bond market is undergoing a fundamental reset as interest rates return to historical averages, driven by persistent inflation and higher nominal growth. Government debt sustainability remains a critical concern, with limited room for policy maneuvers like financial repression, as the market increasingly demands higher yields. While the influx of debt from AI hyperscalers creates localized pressure, the broader fixed-income landscape offers renewed value for investors. Municipal bonds, in particular, present a significant opportunity, trading at historically attractive levels relative to corporate debt. Investors should shift expectations away from the era of zero-interest rates, focusing instead on the total return potential provided by current yields. Despite volatility, fixed-income assets serve as a necessary anchor for long-term liabilities, provided investors remain disciplined in security selection and recognize that the era of anomalous, ultra-low interest rates has concluded.