For over a year now, as Global Head of Fixed Income at asset manager Candriam, he has been responsible for the entire spectrum of fixed-income investments – from government bonds to investment grade (IG) and high yield (HY) bonds with speculative ratings. Nicolas Jullien joined Candriam in the HY division almost 20 years ago and now heads a team of 38 employees.

In late November, the asset manager – a subsidiary of New York Life Investments, the asset management arm of US life insurer New York Life Insurance Company – invited media representatives from across the continent to Brussels, where it also has one of its biggest offices in Europe (Candriam is present in Zurich and Geneva in Switzerland, too). Amidst the Christmas decorations in the Belgian capital, Candriam's experts presented their investment outlook, broken down by asset class.

finews was particularly interested in fixed income and took the opportunity to ask questions directly to the person in charge.

Mr Jullien, what were the most important developments on the global bond markets in 2025?

Fixed income has become more attractive to investors again, with both IG and HY generating appealing total returns. After years of appearing unattractive due to very low interest rates, we saw significant inflows in 2025. Investors are getting involved in order to secure what are still significant returns, often using their still high liquidity reserves to do so. However, there was also a lot of volatility, and spreads, i.e. the yield premiums over government bonds and the swap market, have become very narrow.

What does this mean for your positioning for 2026?

It means that we expect the credit cycle to turn and are preparing ourselves accordingly. Overall, we need to differentiate more because the era of free money is over. There are signs of excesses in the private credit markets and some defaults and distressed HY debtors. We see opportunities in the IG sector, where ten-year bonds from well-diversified corporate debtors with a single-A rating which can offer a yield of 4 per cent. That is not far off the HY yield. We accept the risk associated with the longer duration. And even if spreads widen significantly, leading to price losses, the overall return should remain positive.

«We expect the credit cycle to turn and are preparing for it. There is currently a lot to be said for reducing the weighting of high yield somewhat and take some chips off the table.»

A year ago, the same arguments could have been used to justify moving out of the HY markets – and they would have been wrong. What makes you so sure that now is really the right time?

It is always very difficult to determine exactly when the cycle will turn. Timing the market, i.e. always catching the right moment, is almost impossible. But based on valuations, there is currently a lot to be said for reducing the weighting of HY somewhat and taking some chips off the table. IG is also relatively more attractive in 2026 due to technical factors. For example, many mergers and acquisitions are likely to lead to strong growth in the supply of HY bonds, which tends to weigh on the market. And as I said, spreads are extremely tight in the HY sector. In addition, there is a considerable risk that any correction, if it comes, will be quite severe.

So should one completely abandon the HY sector?

No, but we recommend a more defensive positioning. The aim is to prevent, as far as possible, suddenly finding yourself with a bad apple in your portfolio, i.e. to anticipate. This makes fundamental credit analysis extremely important. We have a team of five credit analysts dedicated to HY, in addition to five HY portfolio managers, for this purpose: Their task is also to assess how technological changes, for example in the automotive industry or in connection with artificial intelligence, will affect the sectors and ultimately the credit ratings of companies.

Isn't the global HY universe simply too big for a handful of analysts?

Firstly, we have significantly more employees who contribute to our comprehensive analysis of issuers, such as our fund managers and economists. And secondly, although there are over 1,000 issuers worldwide, only 400 meet our liquidity requirements. We exclude around 50 others, mostly due to poor corporate governance. That leaves 350 debtors, roughly half of which are from Europe and half from the US.

Corporate governance is a pillar of sustainable investing, keyword ESG. And Candriam, an acronym for «Conviction and Responsibility In Asset Management», already claims to invest responsibly in its name. How important is this aspect to you?

Experience shows that around two-thirds of HY companies that become insolvent already had serious corporate governance problems beforehand. There were several prominent examples of this in Europe in the recent past. ESG was very trendy for a long time and is now facing some headwinds, but it is here to stay and an important component of our risk analysis. Indeed, a thorough examination of corporate governance has long been part of our basic credit analysis of a company.

«Thoroughly examination of corporate governance has long been part of our basic credit analysis. Companies that become insolvent often had serious problems with this beforehand.»

Are you also invested in Swiss debtors?

Yes, but not in Swiss franc bonds. However, the large pharmaceutical companies have bonds outstanding in euros and dollars, and Swiss telecoms companies, both from the IG and HY segments, are also present on the international bond markets.

We haven't even talked about government bonds yet. Normally, this segment would offer the best protection against a general deterioration in corporate credit quality, wouldn't it?

That is only very partially the case today. Due to high debt levels and deficits, long maturities are problematic for some government bonds, for example in the United States. But here, too, we need to differentiate. In the shorter term, the segment is benefiting from the central banks' monetary policy, which is still easing. And German government bonds remain an anchor of stability, even with the spending packages that have been agreed.

In Switzerland, developments in France are causing concern among some investors. Others argue that, in line with its somewhat older «whatever it takes» approach, the European Central Bank (ECB) would intervene with its somewhat newer Transmission Protection Instrument if things really got dicey. Who is right?

«The European Central Bank has not issued any guarantees for the Republic.»

Concerns about the development of public finances and thus government bonds in France are justified. The Republic is currently the sick man of Europe. The ECB has not issued any guarantees, but will only provide support if those responsible offer credible prospects for consolidating public finances. Sometimes, as in Italy in 2018 and the United Kingdom in 2022, the markets have to remind politicians in no uncertain terms that they are heading in the wrong direction and need to change course. At least there are some positive developments.

For example?

Southern European countries such as Portugal have turned the corner. Italy is also moving in the right direction. When it comes to government bonds, it is also important to invest in tomorrow's winners today.