Global Fixed Income Report - September 2026
Executive Summary
August rewarded anyone who owned real assets and punished anyone who owned the wrong sovereign. Gold rose 9.6% to $4,481.50, silver 15.8% to $66.99 and Brent 8.0% to $90.49, while the Treasury curve bear flattened: the 2-year and 5-year each added 9 basis points to 4.34% and 4.49%, and the 20-year and 30-year moved 1 and 2 basis points to 5.24% and 5.25%. 2s10s narrowed 4 basis points to 41. Five of our six African sovereigns tightened. The sixth, Senegal, widened 74.6 basis points and is the reason this report leads with credit rather than rates.
The month had a clean structure once you separate the two halves. Through mid-August the market priced a Fed that could not hike into a contracting labour market, and long-dated risk assets rallied. From 20 August the direction reversed twice: hawkish FOMC minutes, then a Treasury that doubled its long-bond buybacks after the 30-year touched its highest yield since 2007, then a new Fed Chair who told Jackson Hole on 28 August that financial conditions are not restrictive. September hike odds finished near 56%, having started the month closer to 30%.
What that sequence teaches is worth more than the month's returns. The long end did not move much in August, but it moved for two opposite reasons in the space of eight days, first because the debt manager bought it and then because the market decided the new Chair would defend the inflation target. Only the second reason is investable. We hold duration at the back of the curve and we have stopped taking curve positions until the 16 September FOMC shows us how this Fed actually responds to data.
Gold is the clearest read on the whole episode. It rose almost 10% on the month, peaked at $4,697.80 on 24 August when the Treasury was suppressing long yields, then gave back 4.6% into month end once Warsh spoke. Investors were not buying an inflation forecast in August. They were buying protection against a policy framework that looked like it might not hold, and they sold some of it back when a credible voice arrived. That tells you the marginal buyer of long-dated dollar assets is watching institutional credibility, not CPI prints.
Senegal is the month's real story and the subject of a dedicated section below. Its three Eurobonds now trade between 50.3 and 51.8 cents despite maturities running from 2031 to 2048. A price range of 1.5 points across a 17-year maturity spread means the market has stopped pricing coupons and started pricing recovery. Moody's cut the sovereign to Caa2 on 28 August, and on 1 September, one day after our period closed, Senegal agreed a $2.2 billion IMF programme and announced it will restructure roughly $5 billion of Eurobonds under the G20 Common Framework while continuing to pay its September coupon.
That last detail is the investment case. Zambia, Ghana and Ethiopia all stopped paying while they negotiated. Senegal says it will keep paying. At 51 cents an investor collects between 12% and 15% current yield during a restructuring that may not impose a principal haircut at all. We are starting a position, sized small, in the two bonds that offer the best recovery-per-dollar, and we set out below exactly what would make us add and what would make us leave.
