Bantleon Recommends Medium Maturities for Bonds in 2026

Hermann Bantleon GmbH anticipates that short and medium-term maturities will be favorable for bond investments in 2026. The investment firm recommends overweighting these durations, while also allowing for selective engagements in longer maturities if attractive yields present themselves.

The year 2025 underscored the importance of duration management. Within the Eurozone's Investment Grade corporate bond market, particularly excluding financial issuers, medium-term maturities performed well. Long-dated bonds were negatively impacted by a steeper yield curve, widening the spread between long and short yields. Central bank policies from the Fed and ECB, along with geopolitical developments, are expected to continue influencing bond yields in 2026.

Performance in 2025 varied significantly by maturity. Bonds with approximately five years to maturity yielded around 2.68 percent, while two-year maturities offered 2.5 percent, approximately 0.5 percentage points above the current deposit rate. In contrast, bonds with maturities around eight years yielded only 1.7 percent due to the steeper yield curve. Very long-dated bonds, exceeding ten years, experienced a capital loss of 3.5 percent.

The Federal Reserve has implemented multiple interest rate cuts, with market expectations pointing towards further reductions to around 3.00 percent in 2026. The European Central Bank (ECB) faces a different scenario. With inflation remaining slightly above its target and economic growth subdued, the ECB has maintained its rates, and markets are even pricing in minor rate hikes towards the end of 2026. This shift in monetary policy necessitates a more balanced view on interest rate trends.

Bantleon advocates for an active investment strategy considering monetary policy and geopolitical factors. The firm believes medium-term maturities offer a solid balance between return and risk, while caution is advised for longer maturities, awaiting more compelling yield opportunities.