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Bond Market News
UST Curve Bear Steepens
August 31, 2026
Fed Chairman Kevin Warsh, during his Jackson Hole address, reaffirmed that bringing inflation under control remains the Fed’s key priority, noting that recent softer data is not enough to confirm sustained progress. He said the Fed still has “work to do” and could raise rates further if inflation remains sticky. As a result, US Treasury yields bear-flattened, with the 2Y yield rising 10bp and the 10Y yield up 3bp. The final reading of Michigan Consumer Sentiment index for August came in at 51.7 vs. expectations of 51.0 and prior month’s print of 55.2. Separately, the US and Iran exchanged military strikes for the first time in a month.
Looking at equity markets, the S&P and Nasdaq fell by 0.3% and 0.5% respectively. US IG CDS spreads were 0.2bp wider, while HY CDS spreads widened by 1.7bp. European equity markets ended higher. Euro area policymakers flagged ongoing inflation risks, with some pointing to a possible rate hike in September. European IG CDS spreads were flat, and Crossover spreads widened by 0.3bp. Asian equity markets have opened broadly lower this morning. Asia ex-Japan CDS spreads tightened by 0.8bp.
Rating Changes
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Health And Happiness Upgraded To ‘BB+’ On Growing Multi-Segment Strength; Outlook Stable
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Moody’s Ratings downgrades Senegal’s ratings to Caa2 and maintains the negative outlook
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Moody’s Ratings changes Nigeria’s outlook to positive, affirms B3 ratings
Term of the Day
Bear Steepening
Bear Steepening refers to a move in the yield curve where the longer-dated bond yields move higher than the shorter-dated bond yield (far maturity bonds sell-off more than near maturity ones). A bear steepening move can occur due to different reasons some of them being long term expectations of inflation picking up, higher supply of longer-dated bonds, central bank tapering purchases with a focus on the long-end bonds etc.
Talking Heads
“I’m not going to tell them what to do… I’m going to say that I do think that we probably reached the end of Abenomics, which was a reflationary program.”
“Some version of that can always repeat, but rates are at a very different place today,… While there are still pockets of higher risk names, today’s convert market has many issuers that are experiencing exceptional fundamental momentum in both revenue and profitability.”
On ‘Too Much, Too Fast’ AI Debt Is Stoking Bond Yields – Pacific Investment Management Co
“The AI capex story is beyond the US borders,… You’re seeing Taiwanese real growth at 12%, Korean growth, gangbusters.”
Top Gainers and Losers- 31-Aug-26*
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