Investment weekly 4 september 2026

Investment Weekly 4 September 202 6 For Professional Clients only. Marketing Communication.

Chart of the week – Surging bond yields 9.0 10-year government bond yields, %

Government bond yields are making headlines across the G7. US 10-year Treasury yields touched 4.8% this week , their highest since late 2023 . In Japan, 10 -year JGB yields breached 3.0%, a level not seen since the 1990s , while UK Gilt yields reached new post -GFC highs. Investment Grade Credit → But for investors it is not simply the speed of the rise or the level of yields that matter – it is the reason s for the Why investment grade credit move s . Looking beneath the surface is therefore cr ucial. In the US, r eal yields have driven the increase this year with has been so resilient the term premium also rising. Longer -term inflation expectations have picked up since late June but are still below the level seen coming into 2026. This suggests the market is pricing more than simply a renewed inflation shock: concerns about fiscal sustainability, debt supply, and geopolitical risk are increasingly leading investors to demand a greater return for holding long -dated government bonds. The bond vigilantes are getting restless. Governments may want lower borrowing costs, but investors ultimately decide what return they need to finance them. Treasury Secretary Scott Bessent has already sought to ease pressure on the long end of the US curve, including by increasing Treasury buybacks. The fact that yields have subsequently moved higher again is a reminder that the bond Profits Outlook → market cannot simply be managed by policymakers. Why earnings are The good news is that historically, high starting yields and a steeper curve have tended to improve the prospective broadening beyond tech return from fixed income. Real yields are now relatively attractive by recent standards. So , the bond sell -off is a risk to watch, but not necessarily one to fear . For long -term investors, the question may increasingly be whether today’s higher yields represent a problem – or an opportunity . #bonds #volatility #vigilantes

Market Spotlight A Delphic Fed shift Emerging Markets → For years before Kevin Warsh’s appointment, investors grew accustomed to an Odysseus -like Federal Reserve. Policymakers effectively tied themselves to the mast through pre -commitment and forward guidance. With few How a weaker US dollar major macroeconomic shocks, the outcome wa s a low -volatility environment and a Fed widely seen as predictable. could be a boost for EMs

That backdrop is shifting, and the Fed appears to be changing with it under its new C hair. Ahead of Jackson Hole, markets debated whether a Warsh -led Fed would simply communicate less clearly or deliberately deploy ambiguity as a policy tool. The message now looks closer to an Apollo -like approach: D elphic communication that pushes investors to infer implications, while avoiding becoming a direct source of market turbulence. In practice, this resembles a return to a Greenspan -era framework – broad discussions of possible future states of the world and the Fed’s reaction function, without explicit commitments. Warsh also highlighted a wide set of Read our latest vi ews: macro indicators he is paying a ttention to. The message to markets? Become “data -watchers”, not “Fed - Investment Monthly : watchers” . But the anchor for policy remains firm: a clear commitment to the 2% PCE inflation target . August 2026 #jacksonhole #policy

The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. The level of yield is not guaranteed and may rise or fall in the future. Past performance does not predict future returns. For informational purposes only and should not be construed as a recommendation to invest in the specific company, country, product, strategy, sector , or security . Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC A sset…