Monthly Bond Commentary - August 2026

Bonds are back in mainstream media as long-dated sovereign yields hit their highest levels since the early 2000s, or even the late 1990s. Central banks have taken a more hawkish stance as inflation across Europe and North America begins to reaccelerate. Inflationary pressures are skewed higher the longer the conflict in the Middle East continues, with rising tensions compounding the risk. This week, the Federal Reserve raised rates for the first time since July 2023, cementing Kevin Warsh's hawkish credibility. These factors have pushed yields higher across the curve; however, our duration positioning has protected portfolios from the worst of the move.

Credit, meanwhile, is bracing for the greatest volume of bond issuance on record. Dealers forecast approximately $2tr in supply this year, beating the record $1.66tr set in 2020, with net issuance doubling to $970bn versus last year. Demand is so far keeping pace with supply, with bond spreads unchanged at the index level year-to-date. The notable exception is hyperscaler spreads, which are significantly wider after 16 bond deals across 7 currencies, totalling $228.7bn in USD-equivalent issuance year-to-date. Alphabet has been the most frequent issuer, with 8 visits to the market, selling 50 bonds and raising $80.7bn, while Amazon made 6 visits, issuing 42 bonds and raising $98.0bn.