Higher bond yields in an era of abundant supply

Higher bond yields and abundant new issuance make fixed income more selective, favoring quality, shorter maturities and targeted exposures over broad market bets.

• Consensus expectations for hyperscaler capital expenditure in 2027 exceed USD 1 trillion, while governments, technology companies and utilities increasingly compete for the same long-term capital.
• US underlying growth remains near its 2% trend rate, supported by technology investment and a firm labor market, but housing is weakening and real disposable income growth is approaching zero.
• Robeco expects central banks to remain hawkish because core inflation is above target and energy-price risks have increased; it sees further rate rises from the Fed and ECB, although French bond-market turmoil could disrupt the ECB's plans.
• Global duration is kept broadly neutral, with a more constructive view on European duration and underweights in Canada, Japan and emerging Asia; the US 10-year Treasury yield could overshoot toward 5.5% if valued against long-term nominal GDP growth.
• Credit fundamentals remain healthy, but spreads are historically tight, issuance is heavier and refinancing pressure is concentrated among CCC and distressed borrowers; Robeco favors shorter spread duration, investment-grade carry and higher-quality high yield.

Takeaway: Investors should avoid large directional fixed-income bets and rely on active selection across maturities, sectors, currencies and credit quality, while recognizing that higher starting yields offer a cushion if rates rise further.