According to a leading fixed income manager at US investment bank Morgan Stanley, the bond market has been highly volatile lately and recent global political events have led to prices being detached from fundamentals.
Vishal Khanduja explains that sees rare mispricings in the bond market that experienced investors could exploit. In an interview with the German Business Insider, Khanduja points out several key areas that he believes investors should pay attention to in 2026.
Geopolitics shakes the bond market
Khanduja cites several geopolitical events that have led to increased volatility recently — including the U.S. attack on Venezuela and U.S. President Donald Trump's announcements about Greenland negotiations at the World Economic Forum — and emphasizes that these events detached prices from fundamentals for about 48 hours.
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“For an investor looking for medium to long-term returns, this is a fantastic opportunity to take advantage of some of these mispricings,” explains Khanduja. Breakthrough events in recent years have often created a very attractive environment for investors. This opened up opportunities to gain an advantage over passive benchmarks.
A Morgan Stanley analyst sees opportunities for investors
Khanduja emphasizes that he sees significant mispricing in areas such as interest rate and bond markets. “Intermarket value and interest rates offer many opportunities, not only because of volatility, but also because of dispersion, as central banks in different developed and emerging markets operate differently,” he says.
Cross-market relative value refers to investment strategies that take advantage of price differences between different markets or countries to profit from their relative performance.
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He points to the divergent economic trajectories in countries such as Japan, the United States and Europe. Even though the U.S. economy is undergoing a K-shaped recovery, according to Khanduji — in which wealthy households support consumption while low-income earners suffer — he still sees credit markets as an attractive investment, despite the resulting imbalances.
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“The diversity and volatility of these three elements—interest rates, intermarket value and credit—create opportunities,” concludes Morgan Stanley's bond expert.
