Article afirmerfed ltr

A Firmer Fed MACRO INSIGHT | BROAD MARKETS FIXED INCOME TEAM | September 2026

August was defined by divergence within DISPLAY 1 developed-market yield curves rather than a Asset Performance Year-to-Date broad directional move in rates. Short-dated yields rose as investors reassessed the likelihood Oil 49.4% that the policy cycle could shift back toward MSCI Emerging Equities 22.4% tightening, while long-dated yields were stable or MSCI Developed Equities 12.3% lower, leaving curves flatter across most major S&P 500 12.3% markets. Spread sectors were firm but increasingly Euro Stoxx (Euro) 10.9% dispersed: high yield and emerging market debt Global Convertibles 7.9% tightened materially, while investment grade was EM Local 4.6% largely unchanged. Volatility also declined across S&P Leveraged Loan Index 3.1% both rates and equities. US HY 2.7% EM External 2.2% The rates move was relatively contained in the U.S. The 10-year Treasury yield rose 1.5 basis points (bps) to 4.75%, EUR HY 2.1% while the 2-year yield increased 5bps and the 30-year US TIPS 1.5% declined 3bps, flattening both the 2s10s and 5s30s curves. Dollar Index 1.1% Ten-year breakevens widened 4bps as real yields declined, US CMBS 0.7% suggesting that the modest increase in nominal yields was driven more by inflation compensation than by tighter real EUR IG 0.1% rates. Elsewhere, moves were more pronounced and largely US MBS 0.1% country-specific. Ten-year yields rose 17bps in Australia, US AGG -0.3% 15bps in Japan, and 12bps in Germany, while UK gilt yields Global Agg -0.4% were broadly unchanged. Japanese yields reached their highest levels since the mid-1990s, reflecting expectations US IG -0.4% for further Bank of Japan tightening alongside concerns EUR vs USD -1.1% around fiscal expansion. US 10Y Treasury -1.3% Federal Reserve communication was the central policy event German 10y Bund -1.3% of the month. Following the late-July decision to leave rates JPY VS USD -1.9% unchanged at 3.50%-3.75%, despite three votes for a 25bps hike, markets entered August with a September increase Note: USD-based performance. Source: Bloomberg. Data as of August 31, close to fully priced. Expectations eased following a softer 2026. The indexes are provided for illustrative purposes only and are not July Consumer Price Index (CPI) report, then rose again after meant to depict the performance of a specific investment. Past performance is no guarantee of future results. See pages 7-8 for index definitions. Chair Warsh’s Jackson Hole address reaffirmed the Fed’s 2% personal consumption expenditures (PCE) inflation target, characterized financial conditions as insufficiently The views and opinions expressed are those of the Portfolio Management team as of September 2026 and are subject to change based on market, economic and other conditions. Data sourced from Bloomberg as of August 31, 2026 unless otherwise stated. Past performance is not indicative of future results

restrictive, and emphasized the need for further progress on DISPLAY 2 underlying inflation. With PCE inflation at 3.7%, the message was viewed as notably firmer than in July. September hike Currency Monthly Changes versus USD (+ = appreciation) expectations moved back above one-half, while the long end remained relatively stable. Neither the European Central South Africa 2.6 Bank nor the Bank of England met during the month. Australia 2.1 Foreign exchange markets extended July’s reversal of U.S. Indonesia 1.6 dollar strength, with the broad dollar index declining Malaysia 1.4 0.9%. Commodity and higher-beta currencies generally Norway 1.4 outperformed, with the Korean won, South African rand, Australian dollar, and Mexican peso all appreciating. The Canada 1.2 yen was the weakest major currency, depreciating 1.5% Singapore 0.9 despite higher Japanese yields. Emerging-market currency Euro 0.8 performance remained highly differentiated, with the Hungary 0.7 Brazilian real and Colombian peso weakening against a New Zealand 0.6 broadly softer dollar. U.K. 0.5 Credit markets were notably stable at the top of the Poland 0.3 capital structure. U.S. investment grade spreads finished unchanged at 78bps option-adjusted spread…