Fixed income, football and Scotland at the World Cup
Back
Article Type
BondTalk
Topics
Credit, Rates, Banks, Opinion
Published
June 11, 2026
Read time
8 mins
Author
Colin Finlayson, CFA
Share

On 10 June 1998, Brazil and Scotland opened the World Cup in Paris. It was a proud moment for Scotland, but also the start of a 28-year exile from football’s biggest stage. After Hampden heroics, including that famous halfway-line goal, Scotland are finally back for USA 2026. 

 

A lot changed while Scotland were away. Crises, bubbles, Quantitative Easing and inflation shocks reshaped the economy and bond markets. Returns swung hard between government bonds, investment grade and high yield as investors chased safety, income and risk. So, after nearly three decades on the sidelines, who won fixed income’s World Cup?

 

1998 – 2008: Government bonds win when it matters

 

Key Events

 

  • Asian crisis, Russian default and Long-Term Capital Management (LTCM) crisis rocked markets.
  • The dot.com boom drove the Nasdaq almost 280% higher before its March 2000 peak.
  • The tech bust and 9/11 hit growth and confidence.
  • The Fed cut rates from 6.25% to 1% by mid-2003.
  • Easy money then helped fuel the credit boom that ended in the Global Financial Crisis.  

 

Bond Market Performance

 

This decade was marked by repeated risk-on and risk-off swings, creating wide gaps across government bonds, investment grade and high yield. Crises in Asia and Russia favoured developed over emerging markets, while the tech bust, 9/11 and recession reinforced demand for higher-quality assets.

 

Two themes stood out. Developed markets outperformed emerging markets after the Asian crisis and Russian default, while weaker growth and lower rates favoured higher-quality, more duration-sensitive assets.

 

High yield recovered after 2003 as easy policy and demand for carry returned. But that rally ended in 2008 when the Global Financial Crisis triggered a sharp repricing of credit risk. Government bonds again proved the safe haven.

 

By the end of the period, government bonds returned 103%, ahead of investment grade at 75% and high yield at 26%, showing how strongly investors rewarded safety*.

 

Final standings

 

Star player – Government Bonds: man of the match when things got ugly


Knocked out at the group stage – High Yield: hit hardest when conditions turned

 

World Cups Scotland missed – 2


2002 – Japan/South Korea: Winner – Brazil

2006 – Germany: Winner – Italy

 

 

2009 – 2019: High yield scores in the age of Quantitative Easing

 

Key Events

 

  • The Global Financial Crisis aftermath gave way to the Eurozone debt crisis.
  • Draghi’s “whatever it takes” steadied markets.
  • QE and negative rates spread across Europe, crushing government bond yields.
  • By 2019, full German curve and around a third of the global bond market yielded below zero.
  • In 2019, the Fed pivoted as global growth slowed.

 

Bond Market Performance

 

Returns were driven by aggressive policy support as governments and central banks responded to the Global Financial Crisis and then the Eurozone debt crisis. Ultra-loose monetary policy lifted all parts of the bond market.

 

The defining theme was the search for yield. In a world of QE and negative rates, investors moved up the risk spectrum, lifting returns across credit. High yield led with 210%, ahead of investment grade at 83% and government bonds at 30%*.

 

Geography mattered too. During the Eurozone crisis, peripheral bonds lagged Germany sharply. Later, ECB liquidity pushed European yields lower relative to the US and other markets.

 

That dependence on central bank support was exposed by the 2013 Taper Tantrum and the 2015 Bund shock, when markets faltered at the prospect of less liquidity.

 

Final standings

 

Star player – High Yield: top scorer in the QE world


Knocked out at the group stage – Government Bonds: little to offer once yields vanished

 

World Cups Scotland missed – 3


2010 – South Africa: Winner – Spain

2014 – Brazil: Winner – Germany

2018 – Russia: Winner – France


2020 – 2026: Government bonds lose as inflation changes everything  

 

Key Events

 

  • Covid-19 shut the global economy in 2020 with huge policy support and a vaccine-led rebound.
  • Ukraine war reignited inflation in 2022–23 and triggered the fastest rate hikes in decades.
  • UK Liability Driven Investment (LDI) crisis and US Regional banking stress exposed the strains.
  • Yields and interest rates peaked in late 2023 before falling over next 2 years.
  • Trump’s 2025 return revived trade, fiscal and geopolitical concerns.

 

Bond Market Performance

 

Covid-19 triggered a violent fixed income sell-off in early 2020. High yield fell more than 20%, investment grade dropped and government bonds wobbled*. Markets recovered into 2021, but the bigger shock came with inflation in 2022.

 

Russia’s invasion of Ukraine reignited inflation, with UK CPI peaking near 11%, driving yields higher and forcing central bank tightening. 2022 became one of the worst years on record for bonds, with few places to hide.

 

Higher yields rebuilt the case for fixed income. As rates peaked, bonds again offered meaningful income and demand returned, especially in corporate credit.

 

Even after cheapening, government bonds lagged corporate credit as inflation and fiscal concerns damaged confidence in the asset class. Over 2020–2026, government bonds returned -14%, versus 8% for investment grade and 30% for high yield, showing how far Government bonds fell behind*.

 

Final standings

 

Star player – High Yield: versatile performance - strong income, less duration pain


Knocked out at the group stage – Government Bonds: off-the-pace when inflation fit

 

World Cups Scotland missed – 1


2022 – Qatar: Winner – Argentina

 

 

 

2026 – Bonds are back in the starting line up

 

28 years is a long time to wait for a World Cup; it’s an eternity in bond markets. In that time, bonds lost and regained the key feature that makes them special: income. In this post-QE world, bonds can again diversify broader allocations while offering attractive income. Like the Scottish men’s football team, they have regained their rightful place at the top table for investors.

 

No Scotland, no party? No bonds, no party…!

 

World Cups Scotland missed - 0

 

 

Appendix

 

Asset class returns

 

Period   Government Bonds   Investment Grade Corporate Bonds   High Yield Corporate Bonds 
1998 - 2008   103% 75% 26%
2009-2019 30% 83% 210%
2020-2026 -14% 1038% 30%
Total 123% 240% 431%

*Source – ICE BofA indices; Bloomberg. Global High Yield (HW00); Global Credit (G0BC); Global Sovereign (W0G1)

 

 

Important information

Author

Colin Finlayson, CFA
Portfolio Manager
Colin Finlayson, portfolio manager, is a member of the global rates and multi-sector portfolio management teams.
View profile
Related Articles
View all Aegon insights