Theme Commentary CORP DEBT 2026 09 30

INVESTMENT COMMENTARY 30 Sep 2026 INVESTMENT COMMENTARY 30 September 2026

Corporate Debt Strategy Corporate Debt Strategy

Global Markets August payrolls rose by 133,000, reversing July's 23,000 decline. The September was a challenging month for bonds, while the impact on unemployment rate held at 4.1%, and participation rose to 61.6% from equity markets was relatively muted. Higher oil prices and central bank 61.4%. tightening dominated market developments. August Consumer Price Index (CPI), released on 11 September, was Following skirmishes between the US and Iran in the Strait of Hormuz, firmer than expected. Headline CPI rose 0.4% month on month (mom) Saudi Arabia shut its East-West pipeline on 11 September after drone (3.4% year on year (yoy)), and core CPI rose 0.3% mom (2.5% yoy), up attacks from Iraq, sending Brent Crude above USD 108/bbl. The pipeline from 0.2% in July. August Personal Consumption Expenditure (PCE), reopened after 10 days, and US-Iran negotiations on the sidelines of the released on 30 September, was mixed: headline PCE rose 0.3% mom UN General Assembly provided some relief, but Brent Crude still rose (3.4% yoy), while core PCE rose 0.25% mom and the core annual rate 14.4% over the month to USD 103.5/bbl, while West Texas Intermediate eased to 3.0% from 3.3% in July. (WTI) gained 7.6% to USD 90.4/bbl. Concerns over global refining The Federal Open Market Committee (FOMC) raised the federal funds capacity and the availability of diesel and distillates also persisted target range by 25 bps to 3.75%–4.00% on 16 September, its first hike through the month. since 2023, in a unanimous vote. Chair Kevin Warsh said the Committee The Federal Reserve (The Fed), the European Central Bank (ECB) and the had "removed a dose of accommodation", and the projections included Bank of Japan (BOJ) each raised policy rates by 25 basis points (bps) at least one further hike in 2026. The Federal Reserve Summary of during the month, sending global bond yields sharply higher. The US 2- Economic Projections (SEP) put 2026 real Gross Domestic Product (GDP) year yield rose 55 bps to 4.89%, and the 10-year rose 54 bps to 5.29%, growth at 2.2–2.4%. After the meeting, bond markets fully priced three its highest month-end close since early 2002. The US Treasury index additional hikes by mid-2027. returned -2.2%. In Europe, the 10-year Bund yield rose 26 bps to 3.59%. Real yields drove the Treasury sell-off. The 10-year Treasury Inflation- Equity markets weathered the rates storm thanks to strong earnings. Protected Security (TIPS) yield rose 48 bps to 2.92%, while the 10-year The MSCI World fell 1.3% and the S&P 500 slipped 0.5%, but the breakeven widened only 5 bps to 2.37%. The 30-year TIPS yield rose to Nasdaq 100 gained 3.2%. European equities underperformed, with the 3.34%, extending August's break above 3%, and both the 10-year and Euro Stoxx 50 down 2.4% and the DAX down 4.0%, owing to rising gas 30-year nominal yields ended the month at their highest levels in prices and a fiscal crisis brewing in France. Emerging Market (EM) decades. equities outperformed, with the MSCI EM index down only 0.8%, as Europe Brazil's Ibovespa rose 5.0% in reaction to market-friendly polls. Chinese September flash HICP (Harmonised Index of Consumer Prices), released equities were weaker, with the Hang Seng down 3.7%. The VIX rose to on 2 October, rose to 3.8% yoy from 3.3% in August, while core HICP 16.3 from 14.9. edged up to 2.5% from 2.4%. Energy prices drove the headline increase, The dollar strengthened, with the DXY up 2.0% to 101.45. The euro fell and in late September President Christine Lagarde told the European 2.5% to 1.133, sterling fell 2.1%, the Swiss franc 3.3%, the Australian Parliament that the current shock was longer-lasting. dollar 3.1% and the Canadian dollar 2.7%, while the yen gained 1.5% to The ECB raised the deposit rate by 25 bps to 2.50% on 10 September, a 157.4 per dollar. EM currencies fell 1.8% against the dollar, as decision Lagarde called a "no brainer". The ECB revised up its inflation measured by the GBI-EM Global Diversified (GD) FX return. The Mexican forecasts for 2027 and 2028, with 2028 now at 2.1%, and…