The bond market supported by the search for yield. Households like government bonds

Still attractive yields, tight spreads and the new BTP Italia Sì are reviving the role of bonds in investors’ portfolios.

by Francesco Megna, Head of Sales at Hub Banca and financial markets expert

The bond market is going through one of the most interesting phases of the past fifteen years. After a long period marked by extremely low interest rates and yields often insufficient to offset inflation, fixed income has returned to the centre of investors’ attention. Today bonds are once again offering what for decades was their main function: generating regular income, contributing to portfolio stability and providing a valid alternative to cash.

The most intense phase of the monetary tightening launched by the main central banks now seems to be behind us, although recently some experts have suggested the possibility of a hike because of the oil crisis stemming from the closure of the Strait of Hormuz and, above all, because of the inflation rate (which has edged up slightly again). Even though some uncertainty remains over the path of inflation and global economic growth, markets have gradually begun to price in a scenario of greater rate stability. This shift has revived interest in the bond segment, which today offers yields that would have been unimaginable just a few years ago. In Europe, the market continues to be driven by the search for yield. Government bonds still represent the starting point for many investors looking for a relatively predictable coupon flow.

In this context, Italy continues to stand out for yields that are higher than those offered by the main issuers in the Eurozone. BTPs in fact retain a significant advantage over German and French government bonds. At the same time, the yield spread versus the Bund remains at contained levels, far removed from the tensions that had characterised certain phases in the past. This is particularly important because it allows the Treasury to raise funding on relatively favourable terms and helps support the confidence of international investors.

One of the most interesting aspects of 2026 is the growing involvement of private savings. In recent years Italian households have significantly increased their participation in public debt issues. This is a trend that continues to strengthen and that represents one of the main stabilising factors for the market. It is precisely in this direction that the new BTP Italia Sì fits in, the issue dedicated exclusively to retail investors that will be placed in mid-June. The new instrument is an evolution of the BTP Italia family and was created with the aim of offering small savers a simple and easily understood solution for investing in national public debt.

The new issue will have a five-year maturity and a structure designed to encourage household participation. The security will provide protection against Italian inflation through revaluation of the invested capital and the payment of periodic coupons. In a context in which the erosion of purchasing power continues to be particularly felt, this feature is one of its most attractive elements. The introduction of the BTP Italia Sì also confirms the Treasury’s intention to strengthen its direct relationship with Italian savers. In recent years retail-targeted issues have delivered very positive results, showing that there is strong demand for instruments capable of combining safety, yield and simplicity.

But the renewed interest in bonds is not limited to government paper. The corporate segment also continues to show particularly interesting characteristics. Bonds issued by companies with high credit quality in fact offer yields above the average seen in the years before the monetary tightening. Many investors are therefore building more structured bond portfolios, combining government bonds and quality corporate bonds. The goal is to achieve greater diversification and benefit from different sources of yield.

In this scenario, the issue of duration is becoming increasingly important. After years in which lengthening maturities was almost mandatory in order to obtain adequate yields, the situation is now very different. Numerous asset managers are choosing to keep duration below that of the main market benchmarks. Many multi-asset portfolios currently have an average duration of around 4.5 years, compared with roughly 6 years for global bond indices. This approach reduces sensitivity to interest-rate swings without giving up competitive yields. In practice, investors prefer to favour stability and flexibility rather than take excessive risk on very long maturities.

This approach fits into the increasingly widespread "core and satellite" strategy. The central part of the portfolio is built through diversified bond instruments characterised by high quality and limited duration. Around this core, more specific exposures are then added in order to increase overall yield. The core component plays a stabilising role and represents the main engine of income generation. The satellite component, on the other hand, allows investors to seize opportunities in specific market segments, such as corporate bonds, inflation-linked issues or particular geographic areas.

The American market also continues to significantly influence global dynamics. US Treasuries maintain yields above European ones and continue to attract the interest of international investors. However, currency risk is an element that European investors must assess carefully. Global economic prospects remain marked by a degree of uncertainty. Geopolitical tensions, the evolution of international trade policies, the slowdown in some economies and the growing impact of artificial intelligence on the production system continue to be factors of concern for market participants.

For this very reason, bonds are regaining their historic role as a balancing element within portfolios. In a market environment where equities remain exposed to possible bouts of volatility, fixed income offers a more predictable source of yield and lower price variability. Inflation naturally remains a key variable. Although current levels are much lower than those seen in past years, the risk of fresh price pressures cannot be ruled out entirely.

For this reason, indexed instruments such as the new BTP Italia Sì are attracting particular attention from savers. The possibility of obtaining revaluation linked to the path of inflation is in fact a form of protection that many investors consider valuable, especially for the more cautious part of their wealth. New issues also continue to attract solid demand. Both institutional investors and retail investors are showing interest in instruments that allow them to lock in attractive yields for several years.

This phenomenon shows how the bond market has once again come to be seen as a strategic component rather than merely a tactical one. Another important aspect is the comparison with cash. After years in which many savers kept large sums sitting in current accounts, the current level of yields is encouraging a gradual reallocation towards bond instruments. Bonds in fact make it possible to obtain income potentially higher than simply holding cash, while maintaining a generally contained risk profile.

Overall, the outlook for the bond market is now constructive. Yields remain attractive, spreads are contained and demand continues to be robust. For investors, fixed income is once again a real alternative. After years dominated by equities and the pursuit of ever-higher performance, 2026 is marking a return to greater attention to balance, diversification and income generation. In this context, bonds are once again taking on the central role that for a long time characterised wealth management, offering a combination of yield, stability and protection that many had by now considered a thing of the past.