Higher yields strengthen the case for new allocations as corporate fundamentals remain solid
LOS ANGELES, Oct. 26, 2026 (GLOBE NEWSWIRE) — Payden & Rygel believes the recent rise in investment-grade corporate-bond yields has created a compelling entry point for investors, even as interest-rate volatility has weighed on total fixed-income returns. Investment-grade corporate yields above 6% have improved the income from high-quality credit, even as uncertainty about the direction of interest rates persists.
“Investors can now obtain yields above 6% in investment-grade credit, levels that were difficult to find even in higher-quality high-yield bonds earlier this year,” said Natalie Trevithick, managing director and head of investment-grade corporates at Payden & Rygel. “For new money, that represents a meaningful opportunity. The incremental spread provides additional carry, while corporate fundamentals remain solid.”
Distinguishing Interest Rate Risk from Credit Risk
Trevithick attributes this year’s negative corporate bond returns to rising interest rates rather than deteriorating corporate credit. Investment-grade corporates have outperformed comparable-maturity U.S. Treasuries over the period, illustrating why investors should distinguish price declines driven by rates from weakness in companies’ ability to service their debt.
Companies continue to generate cash flow, and consumer spending has remained resilient. Against that backdrop, Trevithick sees a role for both Treasuries and investment-grade corporates in a balanced portfolio, with corporate bonds offering an additional yield premium supported by issuers’ cash flows and credit quality.
Long Duration Corporates Warrant a Fresh Look – with Some Caveats
Yields approaching 7% on longer-dated corporate bonds have attracted interest from pensions, insurers and other investors seeking income to match long-term liabilities. Limited recent issuance of 30-year corporate debt has also helped support that part of the market.
“Long-duration corporates can provide a meaningful income stream for investors with long-term liabilities or a long-term investment horizon,” Trevithick said. “We are seeing strong demand for 10- and 30-year bonds, particularly from institutional investors.”
The income opportunity does not eliminate interest-rate risk: further increases in Treasury yields could put additional pressure on bond prices. But think that locking in today’s higher yields will reward investors with a longer time horizon.
Examining the financing behind AI investment
Artificial-intelligence and data-center spending adds another dimension to credit selection. Companies are expected to issue traditional corporate bonds, structured debt and other financing arrangements to fund their capex needs. Investors need to examine guarantees, covenant protections and potential obligations beyond the balance sheet, as well as the compensation offered for taking on additional risk.
“The question is not simply whether AI-related issuance comes to market, but how it is structured and whether investors are being adequately paid for the risks they are taking,” Trevithick said. “This will be a market that requires evaluating each company and financing structure individually.”
For investors reconsidering their fixed-income allocations after recent losses, Trevithick’s message is to assess the yield available today alongside the risks. Higher yields can strengthen the case for adding to bond allocations without requiring a rapid recovery in bond prices, while careful credit research and an appropriate investment horizon remain essential.
About Payden & Rygel
Payden & Rygel is one of the largest privately-owned global investment advisers, managing approximately $166.2 billion in assets. Founded in 1983, the firm specializes in the active management of fixed income and equity portfolios, serving a diverse range of institutional clients worldwide. With clients that include central banks, pension funds, foundations, and corporations, Payden & Rygel offers a comprehensive suite of investment strategies through separately managed accounts, US mutual funds, and Irish domiciled funds (subject to investor eligibility). Headquartered in Los Angeles, the firm also maintains offices in Boston, London, and Milan. To learn more, visit www.payden.com.
This material reflects the firm’s current opinion and is subject to change without notice. Sources for the material contained herein are deemed reliable but cannot be guaranteed. This material is for illustrative purposes only and does not constitute investment advice or an offer to sell or buy any security. Past performance is no guarantee of future results.
Media contact: Kate Ennis, DAI Partners, ennis@daipartnerspr.com, (301) 580-6726
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