Fixed income outlook: A generational opportunity

The 2026 fixed income landscape is shaped by a new reality: Rates can hedge, but they can also hurt. Rising term premium, widening fiscal pressures in the U.S. and Europe and divergent global policy paths have made rate volatility more persistent than in past cycles. In this world, the belly of global yield curves stands out, offering particularly compelling characteristics. Importantly, central banks are no longer moving in lockstep. Global monetary cycles are now differentiated, presenting opportunities far beyond the U.S. — from Europe’s normalization to Japan’s regime shift to Asia’s varied easing paths. These realignments can reprice curves quickly, creating both return potential and the need for thoughtful, globally diversified duration placement.

Traditional aggregate benchmarks — across the U.S., euro area and global markets — remain heavily concentrated in government bonds. While these exposures still tend to anchor portfolios, they may reduce risk-adjusted returns in certain environments and can underrepresent the segments driving today’s most compelling opportunities. Many of the markets offering competitive income, diversification and structural advantage — including securitized assets, global corporates, EM hard and local currency debt,— remain only partially captured in benchmark heavy allocations. And while benchmarks are evolving, access to these “plus” sectors still requires intentional and skilled portfolio construction, not reliance on traditional indices. As global central banks move through differentiated cycles, dispersion is rising — across countries, curves, currencies, sectors and issuers. Some regions are easing, others are holding, and a few are tightening. Labor markets, inflation dynamics and fiscal trajectories vary widely. This environment tends to reward precision. With spreads tight in higher quality credit and fundamentals diverging beneath the surface, the most attractive opportunities come from selectivity, and the ability to identify where fundamentals, valuations and liquidity align. This requires deep research, robust risk management and the flexibility to reposition as policy and macro conditions evolve.

Today’s market rewards investors who can combine index efficiency, systematic insights and fundamental security selection across public and private markets, global rates, securitized assets, corporate credit and emerging markets. We believe the opportunity in fixed income is extraordinary and distinctly global.

The iShares Flexible Income Active ETF (BINC) seeks to offer investors access to sectors of the fixed income  market that can be challenging to reach, including European credit, high yield, and securitized products.

Launched in March 2023, the ETF is actively managed by an experienced team led by Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income and Head of the Global Allocation Investment Team. He serves on numerous management committees and is Chairman of the firm-wide BlackRock Investment Council.

Read the full Fixed Income Outlook for more insight into how our leading active investors across our entire global platform are navigating this dynamic market.