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Bond Market News
Bessent offers no fresh guidance on treasury debt management
August 25, 2026
US Treasury yields were broadly flat. US Treasury Secretary Scott Bessent offered no fresh guidance on changes to the Treasury debt management program, adding that the department will “continue with the regular (issuance) program”. He indicated no adjustments are expected before the next quarterly refunding announcement in early November. Separately, he also warned of economic penalties for countries continuing to do business with Iran under a campaign dubbed “Operation Economic Outcast”. US President Donald Trump threatened new 50% tariffs on Canadian vehicles, auto parts and steel with Canada expected to announce retaliatory tariffs against the US today.
Looking at equity markets, the S&P and Nasdaq fell by 0.3% and 0.8% respectively. US IG CDS spreads tightened by 0.1bp, while HY CDS spreads tightened by 2bp. European equity markets ended mixed. European IG CDS spreads were 0.3bp tighter, and Crossover spreads tightened by 2bp. Asian equity markets have opened broadly lower this morning. Asia ex-Japan CDS spreads tightened by 0.3bp.
Rating Changes
- Moody’s Ratings upgrades Pakistan’s rating to B3; outlook maintained at stable
- Moody’s Ratings upgrades XPO’s CFR to Ba1; outlook changed to stable from positive
- Moody’s Ratings downgrades Plastipak Holdings, Inc.’s CFR to B1; outlook revised to stable
- Fitch Revises WE Soda’s Outlook to Stable; Affirms at ‘B+’
- PTT Global Chemical Outlook Revised To Positive On Earnings Rebound; ‘BBB-‘ Ratings Affirmed
Term of the Day: Make Whole Call (MWC)
A Make Whole Call (MWC) is a type of call option on a bond that gives the issuer the right to redeem a bond before its maturity date by compensating (making whole) bondholders for future coupon payments. MWC provisions were introduced in the 1990s and are rarely exercised by issuers. If exercised, the issuer has to pay a lump sum amount to the bondholders that represent the net present value of future foregone coupon payments, typically stated as a formula in the bond prospectus.
MWCs are different from traditional call options in that investors are compensated for foregoing future coupon payments. With traditional call options, the issuer can exercise the call option at the predefined call price without having to pay bondholders for foregoing future coupons. This makes MWCs beneficial to bondholders as compared to traditional call options and are typically expensive for the issuer to exercise.
Talking Heads
On Treasury Buybacks Unlikely to Cut Long Rates – Goldman Sachs
“The US Treasury’s decision to increase long-end buybacks does not address what we see as the main sources of recent long-end volatility… We think the buybacks themselves are unlikely to meaningfully reset rate levels even if scaled up.”
On Bond Market Can Handle High-Grade Stampede – JP Morgan
“While there has been record supply, there has also been record demand,”
On Bond Buying a Mistake – Stanley Druckenmiller
“Governments defending prices against fundamentals always lose. The long-term Treasury yield is the most important price in the world. It is also the only fiscal disciplinarian the US has left.”
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