US Treasury Yields Jump as Markets Nearly Price in a Fed Rate Hike

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May 20, 2026

Credit Ratings
Macro News

US Treasury yields surged higher across the curve – the 2Y was up 5bp to 4.12% and the 10Y jumped 8bp to 4.67%. Amid continued inflation concerns, markets are currently pricing-in nearly 20bp in Fed rate hikes by the end of the year. Philadelphia Fed President Anna Paulson said that the Fed’s monetary policy is “mildly restrictive” and appropriate for the moment. However, she also added that it would be healthy to consider an extended hold or hikes.

The S&P and Nasdaq ended lower by 0.7-0.8%. US IG CDS spreads widened by 0.9bp and HY CDS spreads were 6.1bp wider. European equity markets ended higher. The iTraxx Main CDS spreads were 0.5bp wider and Crossover spreads widened by 5.5bp. Asian equity markets have opened lower this morning. Asia ex-Japan CDS spreads were flat.

New Bond Issues

Huzhou City Investment $ 3Y at 4.85% area
BOC (Sydney branch) $ 5Y FRN at SOFR+100bp area

Indonesia raised ~$3.45via a four-part multicurrency deal. Details are given in the table below:

The senior unsecured notes are rated Baa2/BBB/BBB. Proceeds from dollar denominated notes and the 12Y euro denominated bond will be used for general purposes of the republic. Net proceeds from the 7Y social bond will be used for eligible expenditures under the republic’s framework.

Dar Al-Arkan raised $600mn via a 5Y sukuk at a yield of 7.375%, 37.5bp inside initial guidance of 7.75% area. The senior unsecured note is rated B1 (Moody’s), and received orders of over $1.25bn, 2.1x issue size.

Ford Motor Credit raised $1bn via a 10Y bond at a yield of 6.467%, 25bp inside initial guidance of T+205bp area. The senior unsecured note is rated Ba1/BBB-/BBB-. Proceeds will be used for general corporate purposes.

SocGen raised $1.25bn via a 6NC5 bond at a yield of 5.371%, 20bp inside initial guidance of T+125bp area. The senior non-preferred note is rated Baa2/BBB/A-.

Aviva raised €575mn via a 31.5NC11.5 Tier-2 bond at a yield of 4.853%, 32bp inside initial guidance of MS+190bp area. The subordinated note is rated A3/BBB+ (Moody’s/Fitch). Proceeds will be used for general business/commercial activities, including the refinancing of existing notes.

Lufthansa raised €750mn via a 5.7Y bond at a yield of 4.153%, ~35bp inside initial guidance of MS+140/150bp area. The senior unsecured note is rated Baa3/BBB-/BBB-. Proceeds will be used for general corporate purposes, including repayment of existing debt.

ABN Amro raised $1bn via a 5Y FRN at SOFR+85bp, 15bp inside initial guidance of SOFR+100bp area. The senior preferred note is rated A1/A/AA-. Net proceeds will be allocated to finance and/or refinance, in whole or in part, eligible green assets.

Morocco raised €2.25bn via a dual-trancher. It raised $1.25bn via an 8Y bond at a yield of 4.842%, 30bp inside initial guidance of MS+200bp area. It raised $1bn via a 12Y bond at a yield of 5.289%, 30bp inside initial guidance of MS+230bp area. The senior unsecured notes are unrated. Proceeds will be used for general government purposes.

New Bonds Pipeline

Republic of Congo offshore bond
Oman Arab Bank $ PerpNC5.5 AT1 bond

Rating Changes

Ratings On Seven Nigerian Banks Raised To ‘B’ Following Sovereign Upgrade; Outlooks Stable
Fitch Downgrades Aston Martin’s Senior Secured Notes to ‘CCC+’/RR4; Affirms IDR at ‘CCC+’
Getty Images Inc. Downgraded To ‘B’; Ratings Put On CreditWatch Negative Due To Weaker Cash Flow And Merger Uncertainty

Term of the Day: Call Protection

Call protection is a protection given to investors by limiting the conditions under which a bond issuer may choose to redeem bonds prior to their stated maturity date. There are two types of protections – a hard call protection and a soft call protection.
– A hard call protection prohibits the bond issuer from calling the bonds until after a stated amount of time has elapsed. For example, a 7NC3 bond that can not be called in the first three years, ensuring the coupon rate is maintained for the first three years.

– A soft call protection tends to come alongside a hard call protection where the issuer is required to pay a premium to investors over and above the face value if they redeem the bond before maturity.

Talking Heads

On Fed to avoid cutting rates this year; economists still say war-driven inflation is transitory

Aditya Bhave, BofA

“Both hikes and cuts are feasible…the base case is a hold, and it’s a close call between the other two options, to be honest. It feels like if they are going to have their next move as a cut, it’s more likely to be next year than this year”

Scott Anderson, BMO Capital Markets

“There is a big risk we’re in this new kind of era where you’re going to ⁠see more frequent shocks”

On 5.5% May Be Next Focus for 30-Year Treasury Yield – Citi

“Investors’ calculus in terms of buying the dip on Treasuries has changed… I see markets underpricing the risk of a Fed rate hike starting this year… If long-dated US yields continue to march higher, it creates a pretty unstable equilibrium for riskier assets”

On BOJ Hike Key to Strengthening Yen – Alberto Tamura, Morgan Stanley

“Some investors believe that the Bank of Japan is behind the curve, so hopefully taking action will be step number one. If things stabilize around the world, maybe that could also be the path to a stronger yen”

Top Gainers and Losers- 20-May-26*