Fixed Income Outlook 2026
How will interest rates, inflation, and credit markets evolve in 2026? What risks and opportunities should investors consider in the fixed income space? Svein Aage Aanes, Head of Fixed Income in DNB Asset Management, shares his outlook on global rates, inflation, credit risk, and the unique position of Nordic bond markets.
Global Interest Rate Outlook: Stability Amid Divergence
What is your baseline view for interest-rate developments through 2026? Should we expect a prolonged period of higher rates, or a faster-than-expected decline in key policy rates?
During 2025, central banks have cut rates, but the timing has varied. The ECB and the Swedish National Bank, the Riksbank, completed their rate cut cycles mainly in the first half of the year, while the Fed and the Norwegian National Bank, Norges Bank, started later and remain in a cutting cycle. We expect no further rate changes from the ECB and Riksbank in 2026. Norges Bank is likely nearing the end of its cycle, with 1–2 cuts expected, the first possibly next summer. Overall, central bank action in Europe is likely to be uneventful in 2026.
The US presents a different picture, with tariff regimes adding uncertainty to both inflation and growth. Signs of a weakening labour market coexist with stubborn inflation. Market pricing suggests close to 1% in cumulative rate cuts by December 2026, but risks are two-sided: less cutting if growth holds and inflation stays high, or deeper cuts if the economy stalls. This could lead to volatility in US rates, though it may not strongly impact European bond rates. In 2025, European rate volatility has been at historic lows, and we expect EUR, SEK, and NOK rates to remain relatively stable in 2026.
5 year rates, very low volatility in European rates in 2025
Inflation Trajectory: Returning to Target—But Not Everywhere
Do you expect inflation to return to “normalised” levels around 2% in 2025/26, or is a structurally higher inflation regime more realistic?
The inflation picture varies. In the Eurozone and Sweden, inflation has largely returned to target levels, with expectations for 2026 at or below those targets. In the US and Norway, inflation remains around 3%, with only marginal declines expected next year. Both are projected to approach target levels in 2027.
