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Bond Market News
Markets No Longer Fully Price In Fed Rate Cuts for 2026
March 13, 2026
US Treasury yields continued to climb higher across the curve with the markets moving towards pricing out Fed rate cuts this year. The Implied Fed Funds Futures markets are currently expecting only 18bp in rate cuts for 2026 vs. nearly 40bp in cuts a week ago. On the geopolitical front, Iran’s new Supreme Leader Mojtaba Khamenei said that the Strait of Hormuz will continue to remain blocked. Brent crude prices continue to trade above $100/bbl. Separately, initial jobless claims for the prior week rose by 213k, better than expectations of 215k.
Looking at US equity markets, the S&P and Nasdaq ended lower by 1.5% and 1.8% respectively. US IG CDS spreads widened by 3.4bp and HY CDS spreads were 17bp wider. European equity indices ended lower too. The iTraxx Main CDS spreads were 2.7bp wider and the Crossover CDS spreads were 10bp wider. Asian equity markets have opened lower this morning. Asia ex-Japan CDS spreads widened by 3.6bp.
New Bond Issues
Beijing Construction Engineering raised $300mn via a 3Y sustainability bond at a yield of 4.1%, 50bp inside initial guidance of 4.6% area. The senior unsecured note is rated BBB- by S&P. BCEG HongKong Co Ltd is the issuer and Beijing Construction Engineering Group Co Ltd is the guarantor. Proceeds will be used to refinance existing offshore debts, and an equivalent amount to finance or refinance eligible green projects.
New Bonds Pipeline
- JLR $ 3Y/5Y bond
- Kexim $ 3Y/5Y bond
Rating Changes
- Moody’s Ratings upgrades Kinder Morgan to Baa1, stable outlook
- Fitch Downgrades Raizen’s IDRs to ‘C’
- Goeasy Ltd. Downgraded To ‘B-‘ On Covenant Breach And Deteriorating Credit Metrics; Placed On CreditWatch Negative
Term of the Day: Sovereign Risk Premium
Sovereign risk premium refers to the additional implied spread that a country’s sovereign bonds offer vs. a benchmark for a particular currency. Put differently, it is the incremental return (or yield) that investors demand from a country to buy its sovereign bonds vs. the benchmark.
Talking Heads
On Investors Hunting for Hedges as War Shatters Decades-Old Strategies
Rajeev de Mello, Gama Asset
“Since correlations have shifted, the obvious rebalancing between equities and bonds, and instruments such as inflation-linked bonds and gold isn’t protecting portfolios… opportunity set for effective risk diversifiers has narrowed”
Goldman Sachs’ Global Investment Research
“Investors should look at a combination of up-in-quality trades in equity, credit and currencies, allocations to alternatives, dynamic risk allocation, and option overlays”
On US Bonds Poised to Erase Year’s Gains as Oil Surge Deepens Slump
Subadra Rajappa, Societe Generale
“The front end feels a bit unhinged as the market recalibrates to this new regime. Higher oil prices, headline inflation and rising stagflationary risks would tie the Fed’s hands.”
Ian Lyngen, BMO Capital Markets
“The backup in 2-year rates is no longer about valuations or a fundamental shift in the market’s outlook for monetary policy… selloff is being exacerbated by risk reduction and stop-outs of crowded longs”
On Warning on Private Credit Liquidity Risks – Francois Villeroy, Governor of the Bank of France
“Debt strategies relying on complex, opaque and increasingly leveraged financing structures, notably in private credit, can also conceal the vulnerabilities of some borrowers…may be amplified by the rising interconnectedness between private markets and other financial institutions”
Top Gainers and Losers- 13-Mar-26*
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