Are you asking too little of fixed income?

Fixed income is anything but one uniform market. Its scale, range of investments, and sources of return are much broader than the traditional image of bonds might suggest. It encompasses countries, currencies, issuers, and credit qualities, from government to corporate bonds, investment grade to high yield, across developed to emerging markets, and structured credit. And, as markets and financing needs change, so do the opportunities within it. Calling it “boring” can obscure how much is going on beneath the surface.

Defense is an important part of fixed income, but it is not its only purpose. It can actually play several roles within a portfolio. Different parts of the market can serve different objectives, from building portfolio resilience and generating income to seeking capital growth and total return. And return potential is not necessarily modest just because an investment sits within fixed income. In some markets and periods, fixed income returns have exceeded those of equities. Put fixed income to work.

While US treasury bonds and investment grade rated developed market corporate bonds indeed make up a significant part of the global bond market, there’s much more to it. The fixed income market also includes bonds from other sovereigns, high yield, emerging-market bonds, both in hard and local currency as well as structured credit like asset-backed (ABS), mortgage-backed securities (MBS) and collateralized loan obligations (CLOs) to mention just a few. Each comes with its own characteristics, risks, and sources of return. Liquidity also varies. Some fixed income markets are highly liquid, while others are less so. Treating fixed income as either “liquid” or “illiquid” misses the range that exists across the market.  At USD 160.7 trillion, the global fixed income market was nearly USD 3 trillion larger than global equities in 2025. Its size, as well as the range of markets within it, may be greater than many investors realize.

1 SIFMA, 2026 Capital Markets Fact Book

No, returns vary widely across fixed income markets and from year to year. Emerging-market local-currency bonds, for example, returned around 20% (in USD) in 2025, approximately two percentage points more than the S&P 500. This is one market over one year, not a long-term comparison. But it is a useful reminder that fixed income is not limited to low-return, defensive strategies.

No, interest rates are an important factor for bond prices, but their impact varies. Duration, credit quality, currency, liquidity and market structure can all affect how an investment responds to changing rates and market conditions. As such, the effect can vary across different parts of the fixed income market. The same applies to valuations. Fixed income is not immune to assets becoming expensive, but valuation dynamics can differ from those in equity markets.

It changes more than you might expect. Fixed income changes with the financing needs of governments and companies. New issuers enter the market, existing markets develop, and new sources of borrowing emerge. AI infrastructure is one current example, with massive funding needs leading to more corporate borrowing. Structured credit and CLO markets have also expanded. For investors, this adds to an already wide range of fixed income markets and investments. Emerging markets are another example. They are often approached as a tactical response to macroeconomic conditions, but parts of the market can also be considered through a longer-term, bottom-up investment lens.