Global Weekly Fixed Income Report - June 26, 2026
US Treasuries
The U.S. market delivered a bull steepener, with yields falling across the curve and the front/intermediate sector rallying more than the long end. Portfolio positioning should lean toward selective duration extension in the 2Y–7Y sector, while remaining cautious on credit beta because spread compression was only marginal, with single-A spreads moving from 91 bps to 90 bps.
Markets continued to digest the June FOMC projections. FOMC summary of economic projections show that the median FOMC memeber revised Q4 2026 core PCE inflation up from 2.7% to 3.3%, revised real GDP growth for Q4 2026 down from 2.4% to 2.2%, and raised the projected Q4 2026 federal funds rate from 3.4% to 3.8%.
The statement also noted that economic activity was expanding at a solid pace, job gains had kept pace with the workforce, and the unemployment rate had changed little.
The Fed remains inflation-sensitive even as growth expectations strengthen. That
combination supports duration on growth-risk grounds but limits the case for aggressive credit risk because policy is unlikely to pivot quickly toward easing.
The curve move indicates that investors added duration, particularly in the front and belly, while the long end rallied less aggressively. This is consistent with markets pricing lower inflation pressure, but not a full policy-easing cycle.
Safe assets outperformed, while credit appetite was more restrained. U.S. single-A credit spreads moved from 91 bps to 90 bps, implying only 1 bp of tightening.
The U.S.-Iran MoU faced its toughest test this week as escalating military actions
threatened ongoing negotiations. Tensions were fueled by Trump's stance on Iran's released frozen assets, Iran's threats over the Strait of Hormuz, and Oman's support for tolling the waterway. Alongside continued Israel-Hezbollah clashes, these developments have heightened inflation risks and could delay global rate cuts. Investors are rotating into safe-haven assets such as the U.S. dollar, while reducing exposure to long-duration bonds. Although both Washington and Tehran remain committed to the 60-day peace roadmap, repeated military flare-ups continue to leave markets vulnerable to geopolitical shocks.
Outlook & Positioning: Favor intermediate Treasury duration, particularly 2Y–7Y
exposure, where yields declined most but still offer attractive carry. Keep credit
exposure high quality and short-to-intermediate. Avoid extending aggressively into lower- quality credit because the Fed’s revised inflation projections leave risk premia vulnerable to renewed repricing.
