With cash rates easing and equity valuations looking stretched, fixed income is back in favour as investors seek capital protection and reliable yield.
Darren Connolly, CEO of InvestmentMarkets, said the rotation reflects a broader shift in behaviour. “Investors have enjoyed higher cash returns in recent years, but as those rates fall away, they are looking for alternatives. Fixed income is emerging as a key part of that search, particularly for investors who want to protect capital and maintain income levels,” he said.
Cameron Window, executive director at Income Asset Management (IAM), said the strongest interest is in longer-dated fixed-rate paper. “Banks have been issuing 10-year paper in the 5.5 to 6.5% range, and those deals are oversubscribed many times over,” he said. “There’s a huge amount of money sitting on the sidelines, and when investors see the chance to lock in future income at those levels, they are jumping all over it.”
Access is a key differentiator, Window said. While many investors default to funds or ETFs for fixed income exposure, he argues direct holdings deliver transparency and control. “You know exactly what you hold and you can express your own view on interest rates. We also provide access to syndicated loan markets, investing alongside major institutions like super funds and investment banks. That’s a part of the market investors often don’t see."
He pointed to a recent Foxtel syndicated loan, issued following its acquisition by global sports provider DAZN, as an example of the opportunities drawing interest. “It was a senior secured facility paying bank bill swap rate plus 5.00%+, effectively delivering 9%+. For wholesale investors, that’s a high-yielding, institutionally-backed deal with meaningful asset security."
Expanding opportunity set
Connolly said the expanding opportunity set is resonating with self-directed investors who have historically overlooked bonds and loans. “Fixed income has long been overlooked in private portfolios, often because it was seen as complex or hard to access. But what we’re seeing now is investors realising that bonds and loans aren’t just defensive, they can be a meaningful source of yield and liquidity, particularly when equity markets look stretched,” he said.
IAM frames the market in two broad buckets. For conservative profiles, investment-grade products yielding about 5.5–6.5% offer liquidity and lower risk. For balanced investors, higher-yield bonds and loans across sectors such as mining, infrastructure and non-bank lending can lift portfolio returns while maintaining diversification.
Looking ahead, Window expects a supportive backdrop. “With interest rates expected to continue to fall, we know bond prices will rise. That gives investors not just steady income but also the potential for capital gains. At the same time, the phasing out of listed hybrids is forcing billions of dollars to find a new home. We’re already seeing that money flow toward opportunities in this space."
Connolly summed up the appeal: “Fixed income is the ballast in portfolios, the part that lets investors, particularly retirees, sleep at night. It may have the reputation of being boring, but right now, for many, boring looks very appealing.”