The Long View Eric Jacobson: The Entire Face of the Bond Market Has Changed
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Nov 25, 2025 In this engaging discussion, Eric Jacobson, a Senior Principal at Morningstar with decades of bond market experience, dives into the evolving landscape of fixed income. He emphasizes how inefficient segments of the bond market create opportunities for active management. Eric also explains the challenges posed by liquidity and contrasts the complexities of bonds with stocks. Key strategies, like structural trades and the use of innovative tools like ETFs, are highlighted as essential for navigating today's bond environment.
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Bond Market Structure Favors Active Managers
- The bond market's structure and fragmentation make active management more viable than many assume.
- Active managers can exploit sectoral inefficiencies that broad stock-style indexing misses.
Small Structural Trades Beat Big Rate Calls
- Structural, repeatable trades in less-followed corners drive long-term outperformance.
- Chasing large interest-rate bets is harder and less reliable than exploiting persistent inefficiencies.
Use Synthetics To Exploit Market Dislocations
- Use derivatives and ETFs to gain or hedge exposure when direct bonds are mispriced.
- Compare synthetic (CDS) versus cash exposure and choose the cheaper route to control risk cost-effectively.