Navigating The Lowest-Yielding Bond Market In History

Man Group

Jonathan Golan

Research

6 Pages

Man Group explores how investors can navigate what it calls the lowest-yielding bond market in history, where returns are structurally capped by yield levels. With over 60% of bonds yielding below 1%, the paper challenges the instinct to chase risk and instead argues for a more disciplined, active approach to fixed income.

Key Takeaways

Yield Caps Returns: With 60%+ of global bonds yielding under 1%, upside is mathematically limited, reinforcing that expected returns rarely exceed starting yield levels.
Passive No Longer Works: Only 2.5% of bonds yield above 4%, making traditional passive strategies less effective compared to active selection in today’s compressed yield environment.
Leverage Doesn’t Pay: Large benchmark issuers carried ~20x leverage yet delivered just 4.5% ROE over three years, highlighting weak returns despite elevated balance sheet risk.
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