Jason Greenblath, Vice President and Senior Portfolio Manager at American Century Investments, on the critical impact of active strategies for corporate bond investors in 2026.
Amid rich corporate bond valuations, Greenblath’s Active Investing: What 2026 May Hold for U.S. Corporate Bonds highlights where American Century is finding attractive opportunities.
While corporate credit spreads1 have been tight relative to historical levels, total yields2 have remained attractive. At the end of 2025, the average investment-grade3 corporate bond credit spread sat at 78 basis points (bps)4, below the 20-year average of 148 bps. However, due to persistently higher Treasury rates since 2022, corporate bonds have offered some of the highest all-in yields since 2009.
While persistently tight credit spreads may generate concerns among some investors, Greenblath sees optimism in the Sherman Ratio. This metric measures the number of basis points credit spreads or yields can increase before investors experience a loss over a 12-month period. At year-end 2025, this ratio indicated spreads or yields would have to climb 70 bps for such a loss—an unlikely scenario, according to Greenblath’s research.
Furthermore, corporate credit metrics have remained strong, with revenue growth and EBITDA5 margins accelerating in 2024 and 2025. Default rates on high-yield bonds6 have been low and slowing, while leveraged7 loan default rates have remained below 5%.
Nevertheless, in this environment, value among corporate bonds hasn’t been readily apparent. Greenblath believes actively managed strategies can uncover market dislocations and event-driven opportunities. In seeking promising bonds, his active approach focuses on five components:
- Thematic trades. Market, economic and industry trends often highlight value among select styles, sectors and securities.
- Catalyst-driven opportunities. Events such as bond tenders and mergers and acquisitions create compelling opportunities for active investors.
- Unrecognized value. Underfollowed securities often offer appealing value.
- New issues. Bond issuers often provide yield incentives to attract buyers.
- Reverse inquiries. Some issuers accept tailored terms from investors.
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Looking ahead, Greenblath expects the yield backdrop to remain favorable. He believes the Federal Reserve8 may cut rates only once this year.
He also notes the yield curve9 may steepen if a healthy pace of economic growth causes inflation pressures to reemerge. Against this backdrop, he favors a barbell strategy—combining high‑quality, short-duration bonds for liquidity and intermediate maturity bonds for income.
Additionally, the market projects corporate bond issuance to rise this year, which could create pricing concessions and selective entry points. Greenblath believes these factors bode well for active managers, who can quickly adjust to changing market dynamics.
During a recent webcast, American Century Investments’ Jason Greenblath, Vice President and Senior Client Portfolio Manager, and Joyce Huang, Vice President and Senior Client Portfolio Manager, discussed how the firm uses active strategies in pursuit of value.
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The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments’ portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
Generally, as interest rates rise, the value of the bonds held in the fund will decline. The opposite is true when interest rates decline.
©2026 American Century Proprietary Holdings, Inc. All rights reserved.
1Credit spreads: In fixed income parlance, spreads are simply measured differences or gaps that exist between two interest rates or yields that are being compared with each other. Spreads typically exist and are measured between fixed income securities of the same credit quality (defined above), but different maturities, or of the same maturity, but different credit quality. Changes in spreads typically reflect changes in relative value, with “spread widening” usually indicating relative price depreciation of the securities whose yields are increasing most, and “spread tightening” indicating relative price appreciation of the securities whose yields are declining most (or remaining relatively fixed while other yields are rising to meet them). Valueoriented investors typically seek to buy when spreads are relatively wide and sell after spreads tighten.
2Yield: For bonds and other fixed-income securities, yield is a rate of return on those securities. There are several types of yields and yield calculations. “Yield to maturity” is a common calculation for fixed-income securities, which takes into account total annual interest payments, the purchase price, the redemption value, and the amount of time remaining until maturity.
3Investment-grade: Typically used in reference to fixed income securities that possess relatively high credit quality and have credit ratings in the upper ranges of those provided by credit rating services. Using Standard & Poor’s ratings as the benchmark, investment-grade securities are those rated from AAA at the highest end to BBB- at the lowest. To earn these ratings, securities, in the judgment of the rating agency, are projected to have relatively low default risk.
4Basis points: Basis points are used in financial literature to express values that are carried out to two decimal places (hundredths of a percentage point), particularly ratios, such as yields, fees, and returns. Basis points describe values that are typically on the right side of the decimal point–one basis point equals one one-hundredth of a percentage point (0.01%). So 25 basis points equals 0.25%, and 50 basis points equals 0.50%. Only when basis points equal or exceed 100 does the value move to the left of the decimal point–100 basis points equals 1.00%, 500 basis points equals 5.00%, etc.
5EBITDA: Earnings before interest, taxes, depreciation and amortization (EBITDA) is an approximate measure of a company’s operating cash flow.
6High-yield bonds: High-yield bonds are fixed income securities with lower credit quality and lower credit ratings. High-yield securities are those rated below BBB- by Standard & Poor’s
7Leveraged: The use of financial instruments and/or borrowed capital to increase potential returns or to increase purchasing power.
8Federal Reserve (Fed): The Fed is the U.S. central bank, responsible for monetary policies affecting the U.S. financial system and the economy.
9Yield curve: A line graph showing the yields of fixed income securities from a single sector (such as Treasuries or municipals), but from a range of different maturities (typically three months to 30 years), at a single point in time (often at month-, quarter- or year-end). Maturities are plotted on the x-axis of the graph, and yields are plotted on the y-axis. The resulting line is a key bond market benchmark and a leading economic indicator.