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Bond Market News
US Treasury yields eases across the curve
August 26, 2026
US Treasury yields eased by 5-8bp across the curve. On the data front, the Conference Board Consumer Confidence print came in at 89.4 vs. expectations of 90.2. Oil prices dropped with Brent crude currently trading at ~$86.6/bbl. Iran and Oman discussed an interim framework to reopen the Strait of Hormuz, including a temporary maritime corridor. Separately, Richmond Fed President Thomas Barkin warned that rising US debt could eventually trigger a “reckoning,” particularly if investors lose appetite for US Treasuries. He also described July’s rate decision as a “close call” and said policymakers will assess more data before the September meet. Boston Fed President Susan Collins said the Fed can hold rates for now, but a lack of sustained inflation progress would warrant tightening policy soon.
Looking at equity markets, the S&P and Nasdaq rose by 0.3% and 0.7% respectively. US IG CDS spreads tightened by 0.4bp, while HY CDS spreads tightened by 1.7bp. European equity markets also ended higher. European IG CDS spreads were 0.5bp tighter, and Crossover spreads tightened by 3.4bp. Asian equity markets have opened broadly higher this morning. Asia ex-Japan CDS spreads were flat.
Rating Changes
- Pfleiderer Group Upgraded To ‘CCC-‘ On Sufficient Near-Term Liquidity; Outlook Negative
- Mercer International Inc. Downgraded To ‘CCC-‘ From ‘CCC+’ On Elevated Likelihood For A Default, Outlook Negative
- Fitch Downgrades airBaltic to ‘RD’ on DDE; Removes Rating Watch Negative; Upgrades to ‘CC’
Term of the Day: Total Return Swap (TRS)
A Total Return Swap (TRS) is a derivative contract – one party (receiver) gains exposure to a bond’s performance i.e., interest payments and price returns. In return, the receiver will pay a floating rate (e.g., SOFR + spread) to the other party (payer). This allows the receiver to gain leveraged access to the bond, while payers can hedge credit risk. Sovereigns can use TRS for immediate liquidity against their own bonds or to manage foreign currency liabilities, and sometimes provide collateralized debt.
Talking Heads
On How AI Debt Is Jolting Markets – Hyeongmin Ha, Hana Securities
“Issuers appear to be diversifying into alternative markets as primary markets in the US and Europe become increasingly crowded by AI-related supply.”
On Governments to Tackle Rising Fiscal Risks – Kristalina Georgieva, IMF
“All countries need to tackle their fiscal problems and formulate and present credible plans to ensure their debt and deficits are on sustainable path… Central banks must be laser focused on their price stability mandates,”
On Short Squeeze in US Long Bonds
Jason Williams, Citi
“This new Treasury ‘put’ improves the asymmetry of owning the long end by providing a potential light backstop”
Libby Cantrill, Pimco
“While conducting buybacks at the long-end of the yield curve may technically decrease yields, a fundamental reason why Treasury yields are higher – notably higher structural US budget deficits, which requires a significant supply of Treasuries to finance the US debt – is not changing anytime soon.”
Top Gainers and Losers- 26-Aug-26*
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