Long-Term Corporates Take Early Lead in the Bond Market in 2026

Maturity risk has been in favor so far this year in the bond market. A couple of weeks may be misleading, but so far in 2026, the crowd’s appetite for longer maturities is resonating in fixed income, based on a set of ETFs through Friday’s close (Jan. 16).

Topping the return ledger in 2026: long-term corporates, based on Vanguard Long-Term Corporate Bond ETF (NASDAQ:VCLT), which is up 0.9% year to date. Long-term governments (TLT) are a close second with a 0.7% rise. Both funds are running comfortably ahead of the US investment-grade bond benchmark via Vanguard Total Bond Market (BND), currently ahead by 0.2%.

US Bonds ETF Performance

Three buckets of fixed income are posting modest losses in the kick-off to 2026, led by intermediate Treasuries (IEF) via a 0.2% decline.

Reviewing numbers through last week, this early in the year as a guide to 2026 comes with obvious caveats, plus one more risk factor: the weekend’s news that President Trump is intent on a US takeover of Greenland, which threatens to roil whatever we thought we knew about the near-term risk outlook for financial markets.

Trump has threatened new tariffs for the UK, France, Germany, and other European nations until a deal is reached that allows Washington to “buy” Greenland. As a result, markets are bracing for the possibility of a new phase of trade war.

US markets were closed yesterday for Martin Luther King, Jr. Day, and so the crowd’s initial reaction to the Greenland news arrives today.

“With the US off yesterday the implications of the tariff threats over Greenland had yet to fully percolate through financial markets,” Deutsche Bank’s Jim Reid wrote in a note to clients this morning. “Markets have reacted but there’s clearly room for bigger moves if the rhetoric increases further … Yesterday [Trump] declined to rule out the use of force to take Greenland, saying ‘No comment’ when asked by NBC News in an interview. That’s driven growing fears about some kind of retaliatory trade escalation from Europe, with increasingly strong comments from several officials.”

Bond investors this week will be preoccupied with the question: Will government securities remain the go-to safe-haven asset this week amid a new round of geopolitical crisis? If so, will long-term maturities continue to lead?

Ark Invest CEO Cathie Wood recently predicted that long-term Treasuries have significant upside potential and that inflation will wane.

“If we’re right, growth will be much stronger and, importantly, inflation will be much, much lower than it has been with tariffs,” she said. “And we think at some point it could drop to zero or below zero if we’re right on oil continuing to fall and rents falling.”

Reviewing the bond market through Friday’s close offers a degree of support for her view, but suddenly that’s ancient history. Assumptions about risk face a new acid test this week, and investors will be watching to learn if the script will flip… again.

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