Chris Joye on markets, economics, and some big topics others don't dare tackle

This interview was recorded 13 January, 2026. 

Interest rates are likely to remain broadly stable in 2026, but if the RBA is forced to hike, it would amount to an admission of policy failure and trigger a fierce public reckoning, according to Coolabah Capital’s Christopher Joye.

Joye’s base case is that monetary policy is already restrictive. With the cash rate at 3.6%, above what the RBA itself considers “normal” at 3%, he argues the hurdle for further tightening is high, and the consequences of getting it wrong would be significant.

“They would be signalling that the easing cycle had failed and that they were mistaken to cut rates. 

And remember, the RBA boasted relentlessly about the fact that it didn't lift rates as far as all the other peer central banks, which generally went to five to 6%. The RBA stopped at 4.35%".

In Joye’s telling, the real pressure on interest rates is not coming from households or businesses, but from government spending that has remained elevated long after the pandemic emergency passed.

“We're borrowing from future taxpayers to spend money today, to basically buy votes in a very myopic and irresponsible fashion"

Against that backdrop, Joye outlines three key areas investors should focus on as they head into 2026.

First, the structure of bond markets has shifted. Credit spreads have tightened, but term premia have widened sharply.

“For decades, those term premia were either zero or negative, and now they’re very, very positive.”

Second, he argues outright bond yields remain compelling, particularly in fixed rate markets.

“The all-in yield that you’re getting on bonds is actually still very, very attractive… we like duration, we like fixed rate bond exposures.”

And third, he is increasingly cautious on hybrids, preferring senior ranking bonds higher up the capital stack.

“The cheapest part of the capital stack is actually senior ranking bonds.”

As well as his market views, Joye offers a sobering assessment of how Australia is tracking. He argues the country has avoided the kind of “cathartic crisis” that forces reform, and that years of stability, heavy public spending, and weak productivity growth have dulled incentives and accountability. 

Whether one agrees or not, it is a confronting lens through which to view Australia’s economic path and the policy choices now confronting investors. For the full experience, make sure to watch the video above. You can also read a short summary below. 

INTERVIEW SUMMARY

Politics is reshaping markets, not just headlines

Joye’s starting point for 2026 is unusually direct: politics has become an investable force.

“Donald Trump is reshaping the economics and geopolitics of the world in which we live. And his policy postures and platforms have been really very extremely radical.”

He cites tariffs, tax cuts, “unilateral action in Iran”, “interventions in Venezuela”, and an “America First regime” that is setting new precedents and disrupting established norms.

“These decisions are establishing all sorts of new precedents for both democratic and non-democratic actors, and they’re really disrupting very deeply the world in which we live.”

He goes further, arguing Trump has shifted Europe’s fiscal and defence posture in a way that flows directly into bond markets.

“He’s completely reshaped fiscal policy and defence policy in Europe by forcing NATO members to commit to spending 5% of GDP on military expenditures… He’s forced the Germans to junk many, many decades of fiscal austerity.”

For Joye, the takeaway is simple: if you want to understand where rates, inflation expectations, and risk premia are heading, you need to understand the political framework they sit inside.

Macro talk, micro trading: “We don’t really trade macro at all”

Joye acknowledges the optics: he talks macro constantly, writes about it, and enjoys the debate. But he is clear about what Coolabah actually does day-to-day.

“From an investment process perspective, we’re really focused on executing half a billion to a billion dollars worth of trades a day… and we’re focused on the micro challenge of just pricing bonds all around the world.”

Coolabah runs “about 80 different bond pricing models” and has “almost 60 professionals” across multiple offices. The job is straightforward in theory and hard in practice.

“Our wheelhouse is just pricing the right interest rate for a high-grade liquid bond or debt security to pay us at any given point in time.”

And that means the goal is not to pick one heroic trade. It is to find mispricings continuously.

“For us, we want to find as many mispricings as possible… We actually want to trade as much as possible.”

Still, he does not dismiss macro. He frames it as a responsibility and a form of risk awareness, even if it only “tunes” decisions episodically.

Australia’s fiscal problem: “We’re borrowing from future taxpayers”

Perhaps the most contentious part of the discussion was Joye’s critique of Australian fiscal policy and the RBA’s reluctance to challenge it.

He argues the RBA encouraged spending during the pandemic, which was reasonable at the time, but failed to “close the door” once the emergency passed.

“When they opened that door for federal and state politicians to spend… unprecedented amounts of money, they never really closed it, and that was the mistake.”

His criticism sharpens when he talks about the cost of money now.

“That 10-year government bond yield… was around 1% in Australia in 2020, it’s closer to 5% today. So money’s very expensive.”

On his telling, the country is still running “massive budget deficits”, with governments “borrowing from future taxpayers to spend money today to basically buy votes”.

He uses Victoria to illustrate the scale:

“Victoria owed the world $40-50 billion in 2019… Today, it’s heading towards $300 billion, and I don’t really see that we’ve got much return on that money.”

And he argues this fiscal stance is working directly against monetary policy.

“You’ve got so much public spending powering the economy that the fiscal policy… is obviously working in direct opposition to the restraining influence of monetary policy.”

Productivity, complacency, and a provocative warning for Australia

Joye links fiscal dominance to a broader stagnation story: weaker entrepreneurship, weaker innovation, and poor productivity.

“We’ve got the worst productivity growth in Australia since World War II.”

His language is intentionally pointed.

“The lucky country has become the lazy land.”

He attributes complacency to long-running growth, strong resource endowments, and rapid population growth, and says Australia has not had enough “creative destruction”.

“We haven’t had a proper recession since 1991… I don’t feel like we’ve had that creative destruction for a very, very long time.”

He then extends the comparison to the US, describing an ideological split playing out through state outcomes.

“You look at… the extraordinary success of Texas and Florida, where they’re running huge budget surpluses… businesses are flourishing.”

He contrasts that with “the mass exodus” from “New York and California”, with “crime… higher”, “poverty… much higher”, and “large budget deficits”. He suggests Australia has not yet had the “cathartic crisis” that forces change.

“I think we’re going to need a cathartic crisis in order to stimulate change.”

Key insights for investors: yields, duration, and avoiding hybrids

Joye’s closing investor takeaways focused less on ideology and more on structure in bond markets.

First, he argues the risk premium has shifted from credit into government bonds.

“There’s basically been a shift in risk premia from our bank bonds and corporate bonds to government bonds.”

He describes “term premia” as having turned positive again.

“For decades, those term premia were either zero or negative, and now they’re very, very positive.”

That matters because it can make all-in yields compelling.

“The all-in yield that you’re getting on bonds is actually still very, very attractive.”

He says some Coolabah strategies are “running yields of close to 7%”, and he likes duration at these levels.

“Averaging into duration with these very high yields makes a huge amount of sense because if something goes wrong in the world, the RBA has to cut… the value of fixed rate bonds will go through the roof.”

On hybrids, he is blunt: spreads are too tight.

“A five-year major bank hybrid’s paying you about 1.8% above cash… [versus] about three to 3.5% above cash.”

He explains the market dynamic (bank hybrids being phased out by 2032), but says replacements are still appearing via insurers, foreign banks, and corporates. His preference remains to move “up the capital stack” into senior ranking bonds, and enhance returns in other ways.

Finally, he flags a major supply shift: the hyperscalers are becoming big bond issuers to fund data centre buildouts.

“We estimate that within a few years, the tech companies will be up to 20% of the entire global bond market.”

For an active credit investor, that is fuel for opportunity.

“We think being a bond market bandit is a really exciting thing in 2026.”