All segments of the euro‑area bond market delivered positive returns in 2025, extending the trends seen in 2023 and 2024. Once again, high‑yield segments stood out (+5.22% for High Yield, +8.72% for AT1), supported by both strong carry and a slight tightening of risk premia, despite a turbulent start to the year driven by trade tensions.
The Corporate Investment Grade segment also posted a performance in line with its carry level (+3.03%), while sovereign bonds remained relatively steady (+0.63%).
Our analysis
Further spread compression now appears limited, but carry—currently around 5% for High Yield and AT1—remains, in our view, a key driver of returns for these two market segments. Investment Grade bonds also continue to offer solid carry, currently around 3%, more than offsetting inflation.
Monetary policy should play a more modest role in shaping rate dynamics in 2026: while an additional 25‑basis‑point cut cannot be ruled out, the ECB’s easing cycle is nearing its end. Political and geopolitical developments could again generate some volatility in 2026, but expected returns remain broadly aligned with current carry levels.
Written on January 9, 2026. Opinions subject to change. This document has no pre-contractual or contractual value. It is provided for information purposes. The analyses and/or descriptions contained in this document should not be considered as advice or recommendations from Lazard Frères Gestion SAS. This document does not constitute a recommendation to buy or sell securities, nor does it encourage investment. This document is the intellectual property of Lazard Frères Gestion SAS - 352 213 599 RCS Paris 25, RUE DE COURCELLES - 75008 PARIS
