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Bond Market News
US-Iran Tensions Escalate; Michigan Sentiment Improves in June
July 20, 2026
Front-end US Treasury yields inched higher while long-end yields were nearly stable on Friday. US-Iran tensions escalated amid a ninth consecutive day of an exchange of strikes, with Brent crude rising above $90/bbl. On the data front, the Michigan Consumer Sentiment for June came in at 54.4, much better than expectations of 51.0. The Import Price Index grew by 7.1% YoY in June, higher than expectations of 6.5%, indicating continued inflationary pressures.
Looking at US equity markets, the S&P and Nasdaq fell by 1% and 1.4% respectively. US IG CDS spreads were 0.8bp wider and HY CDS spreads widened by 4bp. European equity markets ended mixed. European IG CDS spreads were 1bp wider and Crossover spreads widened by 6bp. Asian equity markets have opened mixed this morning. Asia ex-Japan CDS spreads were 1.9bp wider.
New Bond Issues
- Hanwha Aerospace $ 3Y at T+115bp area
New Bonds Pipeline
- Continuum Green Energy $ 5NC2 bond
Rating Changes
- Fitch Upgrades KBank Indonesia to ‘AA+(idn)’; Outlook Stable
- Banistmo S.A. Upgraded To ‘BB’ On Completed Acquisition By Grupo Financiero BSC; Outlook Stable
- Moody’s Ratings downgrades Rumo’s ratings to Ba3; outlook changed to negative
- Moody’s Ratings downgrades Chemours to B1; outlook is stable
- Fitch Revises United Airlines’ Outlook to Positive; Affirms Ratings at ‘BB+’
- Conagra Brands Inc. Outlook Revised To Negative On Weakening Leverage; All Ratings Affirmed
Term of the Day: Drop-Down
A drop-down (in bond/loan agreements) is a move where a company shifts valuable assets out of the group that backs existing creditors and into an unrestricted subsidiary. Because an unrestricted subsidiary is not bound by the old debt covenants and usually does not guarantee the old bonds/loans, those transferred assets stop serving as collateral for current creditors.
After the assets are “dropped down,” the company can raise new debt at that unrestricted subsidiary and secure it with those assets, making the new lenders effectively senior to the old creditors with respect to those assets.
Talking Heads
On Bond Traders Seeing Inflation Fight Continuing
Ed Al-Hussainy, Columbia Threadneedle
“If you do nothing, are you confident that inflation will return to 2% or 2.5%? The answer is no… Fed should feel more comfortable raising rates without worrying as much about the downside risks.”
Chi Chen, BlackRock
“The market is pricing a more hawkish path for the Fed than what we are expecting… Fed is likely to remain in a hawkish space and wait for the data to eventually moderate”
On Fed rate-hike voices swelling before July decision
Beth Hammack, Cleveland Fed President
“For the first time in my tenure, I’m hearing from businesses who say they think we need to take action to curb inflation… Inflation is too high. The labor market is right around my level of maximum employment”
Krishna Guha, Evercore ISI
“Hawks are coming out en masse to try to ensure the Fed follows through on Warsh’s tough talk and actually raises rates in September if the next two inflation prints run hot over the summer and/or continued US-Iran conflict pushes oil prices and inflation expectations higher on a sustained basis”
On Souring on Treasuries as US Growth Beats Europe
Kevin Zhao, UBS
“We still want to sell into rallies. The US still has the best standing. It’s not impacted by the energy shock and still benefits the most from the AI investment boom… We’re still positive on European bonds… combination of high inflation and high deficits, it’s just not good for bond investor”
Top Gainers and Losers- 20-Jul-26*
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