Payden & Rygel: Bonds are no longer the 'cardigan and slippers' of the investment world
Often described as the 'cardigan and slippers' of the investment world, bonds are perceived by some as conservative or unremarkable. In practice, fixed income serves as one of the most versatile and vital building blocks of portfolio construction, contributing income, diversification, and resilience across market cycles.
Attached is a paper by Eric Souders CFA - Director and Lead Strategist of the Global Unconstrained Fixed Income Team at Payden & Rygel discussing the the importance of and opportunities in the bond markets
Fixed income is once again delivering meaningful income and diversification. Current yield levels provide a solid foundation for balanced portfolios. With tighter credit spreads and uneven growth, investors must take an active approach by focusing on quality issuers, careful duration management, and tactical exposure to sectors offering genuine value.
In a slower-growth world, high-quality bonds (including investment-grade corporates and sovereigns) offer stability, liquidity, and reliable income. The upheaval of 2022 showed that traditional portfolio mixes need updating, not abandoning. Bonds remain central to diversification, complemented by selective allocations to alternatives like gold or real assets. Yields remain above five- and ten-year averages, offering better entry points and a cushion against volatility. Select emerging markets may benefit from stronger fundamentals and favorable policy trends, while developed markets face slower growth and policy uncertainty, which makes careful credit selection essential.