Article selectivitytakesthelead ltr

Selectivity Takes the Lead MACRO INSIGHT | BROAD MARKETS FIXED INCOME TEAM | August 2026

Monthly Review DISPLAY 1 Asset Performance Year-to-Date (%) July was defined by a broad selloff in developed-market rates as investors continued to assess the durability Oil 47.46 of growth, inflation, and restrictive monetary policy. MSCI Emerging Equities 18.62 Government bond yields rose across most major markets, Euro Stoxx (Euro) 9.78 while inflation expectations moved higher and U.S. curves MSCI Developed Equities 9.71 steepened. Spread sectors were more mixed: U.S. credit S&P 500 9.41 widened modestly, European investment grade remained Global Convertibles 7.17 resilient, and securitized products absorbed higher rates EM Local 3.89 with only limited deterioration in credit spreads. S&P Leveraged Loan Index 2.12 The rates move was global. The U.S. 10-year Treasury yield U.S. HY 1.71 rose 27bps to 4.73%, while 10-year yields increased 35bps EUR HY 1.64 in Germany, 29bps in the UK, 28bps in Canada, and 32bps Dollar Index 1.62 in New Zealand. In the U.S., the selloff was accompanied by U.S. TIPS 1.59 curve steepening, with the 2s10s spread widening 15bps and EM External 1.26 the 5s30s spread increasing 10bps. Inflation expectations U.S. CMBS 0.44 also rose, with 10-year breakevens increasing 5bps in the U.S. EUR IG 0.35 and by roughly 17 to 20bps across several European markets. JPY VS USD -0.44 These moves reflected continued uncertainty around the path U.S. MBS -0.45 of monetary policy, particularly as positive growth data and German 10y Bund -0.68 lingering inflation risks limited the scope for near-term easing. U.S. AGG -0.69 U.S. IG -0.83 The Federal Reserve’s month-end meeting added to that Global Agg -0.91 uncertainty. The Committee left rates unchanged despite U.S. 10Y Treasury -1.45 three votes in favor of a 25bps hike, creating a hawkish EUR vs USD -1.86 vote split but a more measured policy signal. Chair Warsh emphasized the tightening already delivered by higher -10% 0% 10% 20% 30% 40% 50%

market yields and suggested the Fed was willing to preserve Note: USD-based performance. Source: Bloomberg. Data as of July 31, 2026. flexibility rather than lead expectations with a more The indexes are provided for illustrative purposes only and are not meant to depict the performance of a specific investment. Past performance is no forceful inflation message. Markets interpreted the reaction guarantee of future results. See pages 7-8 for index definitions. function as comparatively dovish: the yield curve steepened,

The views and opinions expressed are those of the Portfolio Management team as of August 2026 and are subject to change based on market, economic and other conditions. Data sourced from Bloomberg as of July 31, 2026 unless otherwise stated. Past performance is not indicative of future results.

September policy expectations repriced, and breakevens DISPLAY 2

moved higher. The response suggested investors viewed the Currency Monthly Changes versus USD (+ = appreciation) Fed as prepared to let financial conditions do part of the tightening work, while remaining less explicit about what Colombia 8.3 would trigger direct policy action. South Korea 7.7 Norway 4.5 Foreign exchange markets partially reversed June’s U.S. dollar strength. The broad dollar index declined approximately 1.3%, New Zealand 3.5

while the yen, sterling, Norwegian krone, and New Zealand Japan 3.3

dollar appreciated. Emerging-market currency performance Sweden 1.8

was highly differentiated, with notable strength in the Brazil 1.7

Colombian peso and Korean won, while the Hungarian forint, U.K. 1.7 Turkish lira, and Egyptian pound weakened. Australia 1.4 Canada 1.2 Credit markets remained orderly despite higher government Euro 0.9 bond yields and historically tight valuations. U.S. investment Singapore 0.8 grade spreads widened 4bps to 78bps OAS, with industrials Mexico 0.8 modestly underperforming financials and utilities. Longer- Poland 0.7 duration yields moved above 6%, increasing the all-in Switzerland 0.1 income available from high-quality corporate credit, though Malaysia 0.0 elevated issuance and tight starting valuations contributed Indonesia -0.7 to…