Monthly Bond Commentary - March 2026

Conflict in Iran since the beginning of March has upended the forecast path of interest rates across the world. Due to the spike in oil prices since the beginning of the conflict 1-year forward inflation expectations in the US and UK jumped above 5% for the first time since Russia's invasion of Ukraine and US CPI inflation in March jumped to 3.3% (the highest in four years). However, the recent downward trend in services inflation may aide the Federal Reserve to hold rates steady (or minimise hikes) as headline inflation remains closer to target. In fact some analysts are still calling for interest rate cuts in the fourth quarter if oil flows resume early in the second quarter and prices fall toward pre-war levels.

Meanwhile, credit markets have held up remarkably well and continue to provide confidence at a time of heightened uncertainty. Our confidence is built on several factors. The average credit spread for our benchmark index is lower at the time of writing than before the first US and Israeli strikes in Iran. This March was the busiest for new bond issuance on record - excluding March 2020 - with Amazon helping to break the record for the largest volume of bonds issued in a single day. Finally, ratings agencies are demonstrating a bullish stance with the more than twice the number of firms in our index being upgraded versus downgraded year-to-date. Naisbitt King has received upgrades to 7% of our holdings, compared to 2.5% for our benchmark, and no downgrades.