Payden & Rygel

An oil supply crisis has sparked a repricing of rate expectations among major global central banks. But will central banks respond to a supply shock with rate hikes? We express skepticism about market pricing for four main reasons.

Rather than trying to predict the future with pinpoint accuracy, we focus on identifying and challenging the most
popular narratives shaping investor behavior. The goal is simple: avoid errors.

We expect 2026 to remain constructive for fixed income as bonds should benefit from a resilient global economy, moderating inflation and easier monetary conditions. The combination of elevated yields and potential decline in yields (driven by lower Central Bank rates and moderating inflation) should support fixed income total returns.
We remain positive on high yield while acknowledging relatively tight valuations and asymmetric risk to the downside. Therefore, we believe security seletion is going to be critical in 2026, particularly avoiding underperformers.

After a decade of near-zero yields, fixed income is once again delivering meaningful income and diversification. Current yield levels provide a solid foundation for balanced portfolios.

As the Federal Reserve cuts rates, yields on money market funds are declining. For investors seeking safety, liquidity, and enhanced income, low duration bond strategies are a compelling solution, according to Kerry Rapanot, CFA.

Investors looking to diversify the fixed income portion of their portfolios are looking to the global bond market, including high-yield bonds. Payden & Rygel’s Timothy Crawmer and Frasat Shah share their views on how monetary policy and economic forces might affect the asset class.

The Unconstrained Bond Strategy and the Marathon which is 2025.
The first half of 2025 delivered a tougher course than the one charted in January. Policy uncertainty and surprises rather than macro drift set the tone, forcing investors to consider a wider range….

At mid-year, we reflect on our key 2025 macro views and reiterate our takes on growth, unemployment, inflation, risk, and rates. If tariff inflation does not appear this summer, the Fed will resume rate cuts. If the unemployment rate rises, even with inflation slightly above target, the Fed will resume rate cuts.

Timely insights presented in a question & answer format that challenges outdated perceptions of risk and highlights where investors may find value in today’s complex macro landscape. Structural opportunity; Positive outlook; Risk perceptions; Attractive valuations and Currency upside.

In mid-May Payden & Rygel’s Global Credit Strategist Timothy Crawmer, and US Rates Strategist Eric Stratmoen provided an overview of market conditions so far and their view of risks and opportunities in the bond markets.  Here’s what they said. 

The proposed U.S. tariff package—described as one of the most significant trade policy changes in over 50 years—could raise effective U.S. tariffs from roughly 2% to as high as 30%, a level not seen since the 1930s. That insight was shared during a recent global macro webinar held by the global asset management firm Payden & Rygel.

rowth concerns have grabbed the market’s attention due to fears of federal cutbacks in spending and employment. We don’t see evidence, yet that DOGE (the US Department of Government Efficiency) will derail growth (i.e., cause a recession or even a substantial slowdown).

The forces shaping fixed-income markets find themselves at a confluence of economic, fiscal, and political factors heading into the new year. Inflation dynamics remain in flux, a new Treasury Department strategizes the balance between fiscal and monetary conditions, and Donald Trump’s incoming second administration all introduce important dimensions to policy and growth.

There seems to be a widespread view that inflation will remain “sticky” or re-accelerate in 2025. Even the Fed expects inflation to moderate slower in 2025, with the median policymaker expecting core PCE inflation to only reach 2.5% in the December 2024 Summary of Economic Projections (SEP) and not back to 2% until 2027. The central tendency of the FOMC projections skews from 2.5-2.9%, giving us a sense of the Committee’s bias. 

As the world’s 5th largest economy and most populous democracy, India is increasingly important for global investors and policymakers.

In the last several years, fixed-income opportunities expanded for foreign investors looking to gain exposure to India. While the Indian sovereign does not issue bonds in dollars, Indian corporates do, and they offer exposure to attractive sectors. Separately, foreign investors are increasing exposure to India’s rupee-denominated government debt on the back of the June 2024 inclusion into JP Morgan’s most widely followed emerging market local bond index.

Despite predictions of a significant decline in both the value and importance of the U.S. dollar, as everyone now knows, the drop in the dollar didn’t happen. Compared to other developed countries’ currencies, such as the Japanese yen, the dollar is up more than 30% since 2022. Further, since 2011, the dollar is up almost 40% compared to a broad basket of currencies! So why were the dollar bears so wrong?

Major central banks easing policy, solid economic growth and moderating inflation should bode well for global investment grade corporate credit. So, is global investment grade corporate the sweet spot in fixed income? We think it might just be.

The absolute return strategy offers a compelling profile. Yields are above 7%, while the average maturity of the strategy is only three years (at the time of writing).

As a bond investor, you might wonder, “What’s the perfect recipe for the fair value of a 10-year Treasury yield?” The U.S. 10-year Treasury yield is one of the most important interest rates in the world. It affects everything from mortgage rates to stock prices.

I’m not as excited about inflation cooling off as some of my colleagues and maybe competitors are. We still see a lot of inflation pressure. Looking at median CPI month to month lets you filter through some of the noisy outliers every month.

We were too defensive last year but changed our stance early in 2024. Our theme this year is “Believe,” inspired by Ted Lasso. Despite tight spreads and fewer Fed cuts than hoped, we see strength in the corporate market.

The U.S. federal fiscal deficit surged to $2 trillion in 2023 or 7% of U.S. gross domestic product (GDP).1 Put another way, the U.S. Federal Government spent $2 trillion more than it received in revenue during its 2023 fiscal year.

A discussion on global corporate bond opportunities in this roundtable featuring the Payden and Rygel fixed income team.