In Credit 14 09 2026

Information for investment professionals

No more zeros With average interest rates of 14.7% over the past four millennia, and 4.7% over the past 400 years, the real anomaly was the zero-rate period of the 2000s. Read on for a breakdown of fixed income news across sectors and regions.

Chart of the Week Gary Smith, Head of Client Portfolio Management team, Fixed Income, EMEA

No more zeros, anymore. While central banks may cut interest rates in future, a return to the near-zero rate environment that defined 2008-21 looks unlikely for three reasons.

1. Structural inflation drivers have changed. Decades of disinflation from globalisation, abundant labour and weak wage growth are fading. Ageing populations, tighter labour markets, supply- chain reshoring and geopolitical uncertainty all point to more persistent inflation.

2. Fiscal dynamics point to a higher-rate environment. Across the G7, spending on defence, infrastructure, the energy transition, healthcare and pensions is rising. Large fiscal deficits suggest the equilibrium level of interest rates has shifted higher.

3. After the inflation surge of 2021-23, central banks are likely to be more cautious about returning rates to emergency levels. The “new normal” should therefore sit materially above zero, making the ultra-low rates of the 2010s an exception rather than a benchmark.

Four thousand years of interest rates (%)

Source: Homer & Sylla/Edward Chancellor/Bank of England/Paul Temperton/LSEG, September 2026

Source: Bloomberg/Columbia Threadneedle Investments as of 11 September 2026. QTD refers to the period from 30 June 2026. OAS – option-adjusted spread; Yield spreads are the spreads over German Bunds (DE); DXY – US dollar Index; SPX – S&P 500 Index; FTSE – FTSE All-Share index; VIX – CBOE Volatility Index; HY – High yield bonds; EMBI-GD – JPMorgan Emerging Markets Bond Index (Global Diversified).

Macro/government bonds Simon Roberts Product Specialist, Global Rates

Global government bonds sold off sharply last week, with yields rising across major markets and the average G7 government bond yield reaching its highest level since November 2000. The move was broad-based, driven by inflation surprises, renewed central bank hawkishness and heavier supply concerns.

The trigger was a surge in oil above $100 a barrel after renewed military engagement in the Middle East, reigniting inflation concerns. In the Red Sea, Houthi advances near Mokha and Perim Island sharpened Bab el-Mandeb shipping risks, compounding worries over oil supply and global price pressure.

Macro data reinforced the move. Friday’s hotter-than-expected US CPI print, with core inflation up 0.3% month-on-month, lifted the probability of a US Federal Reserve (Fed) hike this week to 86% in OIS markets, from 36% three weeks ago. The European Central Bank (ECB) added to the hawkish tone, raising rates 25bps to 2.5% on Wednesday, with markets now pricing three further hikes by summer 2027.

The front end bore the brunt of the selloff last week. US two-year yields rose nearly 25bps to 4.62%, while 10-year yields climbed 18bps to 4.96%. Gilts were among the weakest performers,