Government Bonds

2026 is already shaping up to be another volatile year for geopolitics, economies and markets. But one pocket stands out as a key beneficiary of the present backdrop.

One of the many unusual developments in financial markets last year was the decoupling between German Bunds and other safe haven G7 government bonds, most notably US Treasuries. Since the inception of the euro, it’s been quite a rare event that Bunds and Treasuries move in opposite directions for sustained periods of time.

After a week that saw 10-year Japanese government bonds (JGBs) hit yields not seen since the late 1990’s (and record highs for 30-year and 40-year maturities), alongside one of the most interesting Davos conferences in years, which was held in the shadow of the latest push by President Trump to “acquire” Greenland, it is helpful to take stock of where this leaves the global geopolitical landscape and financial markets.

With spreads well below long term averages and government bond curves pricing in what central banks are likely to do in the next few quarters, opportunities for capital gains through spread compression or sustained rallies in government bonds appear to be limited.

As we approach the end of a year that has seen risk assets shrug off US tariffs and mounting concerns over AI-driven tech valuations, TwentyFour Asset Management’s portfolio management team selects the seven key questions that they believe will define 2026 for fixed income investors.

The wait is over. UK Chancellor Rachel Reeves delivered her much anticipated November Budget on Wednesday, ending weeks of rumours and leaks that had created a general feeling that all measures were on the table – now investors, businesses and taxpayers alike can fill in the empty cells on their spreadsheets and calculate what’s left.

Economic data this week will be weird, and for central bankers it might not be wonderful. In the US, not only will we endure the aberration of non-farm payrolls (NFP) data being published on a Thursday, but we’ll also get several late macro data releases with the government shutdown put off until at least January.

The next few days could be pivotal to any concerns around the independence of the US Federal Reserve (Fed).

Softer US economic data means the pressures on UST yields now look more balanced, but headlines around President Trump’s pick for the next Fed chair are just one reason investors should expect rates volatility to continue.

Despite Israel and Iran exchanging fire for a fifth day, markets seem to be completely disregarding the possibility of this conflict mutating into something serious for the global economy.

While tariffs have done meaningful damage to the economic outlook and raised volatility in rates markets, the softening of the US stance has restored confidence in credit returns for 2025.

Over the last couple weeks, we have seen an ongoing increase in government bond yields across the major global economies, with a particular focus on Japan as yields on longer dated Japanese government bonds (JGBs) have moved sharply higher.