Weekly fixed income commentary Markets digest a hawkish Jackson Hole speech

FIXED INCOME WEEKLY COMMENTARY 31 AUGUST 2026

Markets digest a hawkish Key Jackson Hole speech takeaways • The Treasury curve flattened sharply Friday after Fed Market recap Chair Warsh’s hawkish The Jackson Hole Economic Symposium dominated attention as U.S. Federal Jackson Hole speech warned Reserve (Fed) Chair Warsh delivered a hawkish Friday speech, warning that the Fed still has work to inflation is not meaningfully slowing. Markets responded by pricing in modest do on inflation. tightening for the September meeting. Core PCE rose 0.2% month-over-month • Credit spreads tightened, and 3.3% year-over-year, in line with expectations, giving the Fed some near-term with IG at 78 basis points flexibility without softening its hawkish tone. (bps) and HY at 260 bps, as returns held positive despite Treasuries rallied early before Warsh’s remarks sparked a sharp Friday selloff, late-week volatility. flattening the curve as the front end bore the brunt; the 2-year yield posted its second-largest single-day increase this year. • Core PCE was in line with expectations; the September Returns stayed positive despite the volatility. The Bloomberg U.S. Aggregate Bond FOMC meeting now looms as Index returned +0.13%, investment grade corporates +0.32% and preferreds the key event ahead. +0.33%. High yield returned +0.27% and emerging markets +0.28%, while MBS returned +0.09%.

Chair Warsh’s hawkish Jackson Hole remarks shift near-term risk toward a more AUGUST restrictive stance, with markets now pricing modest tightening for September. We expect the Fed to remain on hold, viewing in-line PCE and flat real spending 31 as consistent with a patient approach, though the hawkish rhetoric raises the risk • China PMI profile heading into next month’s meeting. We forecast a range of 4.25% to 4.50% SEPTEMBER for the 10-year U.S. Treasury yield at year-end 2026. 01 Credit fundamentals remain broadly supportive, with spreads tightening despite the • Euro Area CPI, U.S. ISM rate volatility. September brings a heavy investment grade supply calendar, though Manufacturing, U.S. JOLTS report demand appears strong enough to absorb it. We favor carrying high-quality income, 03 with spread sectors offering attractive all-in yields at elevated levels. • ISM Services 04 • Jobs report

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Markets digest a hawkish Jackson Hole speech

Weekly fixed income snapshot 31 August 2026

The curve flattened sharply as Chair Warsh’s hawkish Friday speech drove The 2-year yield rose 11 bps to 4.35%, a front-end selloff, with the 2-year posting its second-largest single-day the 5-year rose 6 bps to 4.48%, the 10- increase this year. Treasuries had rallied modestly earlier in the week awaiting year fell 2 bps to 4.72%, the 20-year Jackson Hole. Debate continued over whether the Treasury’s buyback program fell 6 bps to 5.21% and the 30-year fell can sustainably reduce long-end yields, which remain well above 10- and 7 bps to 5.21%. 20-year averages.

Municipal bonds declined modestly as Jackson Hole rate volatility weighed on The Bloomberg Municipal Index the sector. Year-to-date performance remains marginally positive. We continue returned -0.16%. to favor longer duration in municipals over Treasuries, viewing elevated absolute yields as an attractive entry point for patient investors.

Taxable munis posted a modest gain as the long-end rally accompanied curve The Bloomberg Municipal Taxable flattening. Year-to-date performance remains essentially flat, though elevated Index returned +0.18% with yields continue to attract crossover demand. spreads at 52 bps.

IG spreads tightened to 78 bps despite a late-summer lull in primary activity. The Bloomberg U.S. Corporate Syndicate desks are bracing for a heavy September calendar, though demand Bond Index returned +0.32% with appears strong enough to absorb even high-end issuance estimates. Yields above spreads at 78 bps. 5.4% continue to draw buyers.

OPINION PIECE. PLEASE SEE IMPORTANT DISCLOSURES IN THE ENDNOTES.