A diversified bond portfolio delivered just over 3% this year (in euros), driven mainly by narrowing risk premiums (‘spreads’, the extra compensation for corporate bonds compared to government bonds) on corporate and emerging market bonds, and to a lesser extent by falling interest rates. In the US, both short-term (up to two years) and long-term (ten years and beyond) rates declined. In the eurozone, short-term rates fell following ECB rate cuts, while long-term rates rose. Concerns about the sustainability of European public debt pushed up long-term yields, weighing on returns for euro-denominated government bonds.
"}},{"componentType":"sectionTitle","title":"Rising Yields Will Cap Returns on Government Bonds"},{"componentType":"paragraph","richBody":{"value":"With global growth steady and inflation easing slightly, we expect only limited further rate cuts from central banks. The ECB is likely to remain on hold, while the US Federal Reserve (‘Fed’) is expected to cut its policy rate three times in 2026 by 0.25% each, bringing it to a range of 3.0–3.25%.
In our base case, eurozone long-term yields will edge higher, driven by persistently high budget deficits and rising public debt. The German 10-year yield—the eurozone benchmark—is expected to rise from 2.7% to around 3.0%. Bond yields in countries with large deficits and rapidly increasing debt (such as France) could climb further. We expect eurozone government bond yields (Bloomberg Euro Aggregate Treasury Total Return Index) to rise by an average of 40 basis points (0.4%). Price declines will be offset by higher coupon income, leaving expected returns on euro-denominated government bonds barely positive at around +0.1% in 2026.
"}},{"componentType":"sectionTitle","title":"Government Bonds Retain Their Safe-Haven Role"},{"componentType":"paragraph","richBody":{"value":"Why hold government bonds despite low return expectations? Well, high-quality sovereign debt provides stability in a diversified portfolio during periods of uncertainty and heightened market volatility. That said, we will remain selective in our choices within this category.
We expect the US 10-year yield to rise from 4.1% to 4.5% in the first half of 2026, driven by stubborn inflation, partly due to import tariffs. In the second half, yields should ease to around 4.25% as inflationary pressures subside—offering some support to global government bond prices.
"}},{"componentType":"sectionTitle","title":"Corporate Bonds: Slightly Higher Spreads Ahead"},{"componentType":"paragraph","richBody":{"value":"With no recession expected in the US or eurozone, we anticipate corporate bond spreads to remain broadly stable. After the sharp tightening in 2025, further compression is unlikely. For eurozone investment-grade corporate bonds (Bloomberg Euro Aggregate Corporate Total Return Index), we expect spreads to rise slightly. Combined with modestly higher long-term yields, this points to an expected total return of around 0.5%.
For global high-yield bonds (Bloomberg Global High Yield Total Return Index), we forecast returns of just over 3.5%. Emerging market bonds could deliver just under 3% (JPMorgan EMBI Global Diversified Composite Index, in US dollars), reflecting a mix of a slightly weaker dollar and higher US yields.
As yields on non-government bonds fell further in 2025, return expectations for bond investors in 2026 are lower than last year. For a diversified bond portfolio, we expect around 1% in our base case. These figures refer to index-level returns. Through active management—using tactical overweights and underweights—we aim to achieve higher returns while keeping risk under control.
"}},{"componentType":"sectionTitle","title":"Alternative Scenarios"},{"componentType":"paragraph","richBody":{"value":"As always, we outline both positive and negative scenarios alongside our base case.
In the positive scenario, economic growth and inflation accelerate more than expected. Government bond yields would rise further, while risk premiums on (high-yield) corporate and emerging market bonds would narrow slightly. In this case, bond returns would remain positive but lower than in the base case.
In the negative scenario, the opposite occurs: government bond yields fall due to a ‘flight to safety’, while risk premiums rise. Here, expected bond returns would be higher than in the base case.
"}},{"componentType":"sectionTitle","title":"Neutral weighting for equities and bonds"},{"componentType":"paragraph","richBody":{"value":"Based on our current view, we maintain a neutral weighting for equities and bonds in the tactical asset allocation of the ING investment strategies. Listed real estate equities are overweight, while commodities and alternative investments have a neutral weighting in the allocation of investable assets. Here you will find our equity outlook.
"}},{"componentType":"linkList","iconTitle":{"title":"Read more"},"textLinks":[{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-home","text":"Investment outlook 2026: Homepage"},{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-equities","text":"Investment outlook 2026: Equities"},{"url":"/en/personal/investing/market-news-and-views/investment-outlook-2026-central-banks","text":"Investment outlook 2025: Central Banks"},{"url":"https://assets.ing.com/m/7dfc82cb56e72468/original/Investment-Outlook-2026.pdf","text":"Investment Outlook 2026: Download PDF"}]},{"componentType":"sectionTitle","title":"Good to know"},{"componentType":"paragraph","richBody":{"value":"Investing involves risks and costs. The value of your investment may fluctuate. Past performance is no guarantee of future results. Read more about the risks of investing
This publication has been prepared on behalf of ING Bank N.V. and is intended for information purposes only. ING Bank N.V. obtains its information from sources deemed reliable and has taken the utmost care to ensure that the information on which it based its views in this publication was not incorrect or misleading at the time of publication. ING Bank N.V. does not guarantee that the information it uses is accurate or complete. The information contained in this publication may be changed without any form of announcement. Copyright and data file protection rights apply to this publication. Data from this publication may be reproduced provided that the source is stated. ING Bank N.V. has its registered office in Amsterdam, commercial register no. 33031431, and is regulated by the Dutch central bank De Nederlandsche Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM). ING Bank N.V. is part of ING Groep N.V.
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