How to navigate fixed income in a multi-speed world

After two decades defined by synchronised business cycles and coordinated monetary policy, the investment world is fragmenting into distinct regional narratives. The fixed income panel at the Loomis, Sayles & Co. Centennial event in Japan on 3 March, 2026  delved into how this shift is creating both challenges and opportunities for fixed income investors.

The end of the synchronised world

"Over the course of the past 20 years, there have really been two defining characteristics of economic cycles," David Waldman, Chief Investment Officer at Loomis Sayles observed. "The first is longer periods of low volatility and expansion, so effectively, fewer recessions. And the second component is that global markets have been more correlated."

That era is decisively over. David Rolley, Co-Head of Global Fixed Income at Loomis Sayles, with over three decades of market experience, puts it bluntly: "We have gotten used to the idea that we have synchronised business cycles and that many policymakers move very similar ways at very similar times. But if we look at the world today, that is not the case. There is no one dominant market. Instead we have shifting areas of potential correlation."

If you take interest rates as an example, Rolley pointed out, while markets such as Japan and Australia are raising interest rates, others such as the Eurozone and China are stable and the Americans are cutting. Even geographically proximate markets like New Zealand and Australia are moving in opposite directions.

“When you have different business cycles at the same time, there's going to be winners and losers and that creates an expanded opportunity set for using factors like duration and will likely also create an expanded opportunity set for using factors like credit and currency as well.”

Greater volatility requires greater flexibility

Matt Eagan, Head of Loomis Sayles' Full Discretion Team with 30 years at the firm, agreed the bond market has changed significantly. When his predecessor, Dan Fuss, was running the portfolio, he pointed out there was peace in the world and the trajectory of interest rates was steadily lower. As a result, bond managers could afford to run a very long duration portfolio because they didn’t really have to worry about timing markets.

Over the past few years, however, Eagan pointed out, demographic change, climate investment and increased spending on security, among other structural shifts, have changed the fixed income landscape.

"Today we can't run it with a very long duration and just let it ride, because we're going to have a problem with principal risk*. Instead we are going to have to be more active in managing duration through the cycle.”

However, he adds: “As time goes on, our view is that these structural features lead to inflation and inflation is distorting a factor in the economic cycle. As a result we expect the cycle to shorten and become more volatile.” All of which is good for active bond pickers like Loomis Sayles.

The technology revolution in fixed income

Another significant change facing fixed income managers, and one which would be insurmountable without significant technological improvements this century,  is the expansion of investable universes. Waldman highlights the scale of this transformation: "We have a database of securities and analytics that from 1999 to today has grown by 450 times. So it's been a dramatic increase in our ability to store, house, analyse, and manipulate data."

This technological capability proves essential given market expansion. "In 2000, there were 3,000 corporate bonds issued in the global corporate index. Today there's about 20,000¹," Waldman notes.

Pim van Mourik Broekman, Co-Head of the Euro Credit Team, illustrates the complexity: "In our benchmark, there are currently around 4,200 bonds, which means there are over 16 million potential bond combinations to be aware of if you are trying to look at things from a relative value perspective. But, we have the data infrastructure that enables us to create applications that make use of machine learning to give us signals when certain bond combinations are evolving in an interesting direction.”

Eagan agreed: "The biggest impact I think it has had is really twofold - speed and confidence.  When you have tools that are handmade for your strategy, that dovetail with your investment philosophy, you are going to be at an advantage, because you will be able to act quickly with confidence,"

The active management imperative

While much has changed within fixed income markets in the past few decades, there are a few things that remain the same.

"Fixed income remains a very asymmetric asset class,” Van Mourik Broekman points out. “You earn a little, you can lose a lot. And so as an active manager, we can create value by avoiding the blowups." The logic is inescapable: "The biggest names in our benchmark are the names with the most debt outstanding, and deciding your allocation or your weighting towards a company solely based on how much debt it has outstanding doesn't seem to be a good way of thinking about credit quality."

Rolley agrees: "Think about benchmarks in fixed income and set aside for a moment your reflexes about benchmarks in equities. If a bond weight of an issuer in the benchmark is growing and growing, it doesn't mean that they're successful, it means that they're borrowing more and more and more money."

This creates a fundamental problem: "You want to be a lender to companies that are high yield today, but low yield tomorrow because they're successful and they can pay their debt down. That might shrink them in the benchmark, but you're going to be happy to own them."

A century of market evolution

As Loomis Sayles celebrates its centennial, the firm's approach reflects both consistency and adaptation. "The set of core beliefs that underpin each of these alpha engines, at least from my perspective, are time tested and durable. They've seen multiple market environments," Waldman reflects.

Yet implementation evolves: "The implementation of our core beliefs, our core foundations has remained constant and consistent over periods of time. But the way we implement them actually may change due to what's going on in the market at any one point in time."

This balance between principle and pragmatism proves essential as markets enter uncharted territory. With monetary policies diverging, security concerns reshaping spending priorities, and technology revolutionising analytics, the fixed income landscape demands both historical perspective and adaptive capability.

For investors, the message is clear: in a multi-speed world, success belongs to those who can navigate complexity with both technological sophistication and time-tested investment discipline. The synchronised world is over—but for astute investors, the opportunities have never been greater.