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Bond Market News
Treasury Yields Surge as Markets Price in Fed Rate Hike by End-2026
June 8, 2026
US Treasury yields surged higher, with a bear flattening of the curve as markets started pricing-in a full 25bp rate hike by the Fed by end-2026. The 2Y yield shot up by 14bp while the 10Y rose by 9bp. On the data front, US NFP for May showed a pick up of 172k jobs, coming in significantly above estimates of an 88k gain. Besides, the NFP numbers for the April was also revised much higher to 179k from 115k. Average Hourly Earnings (AHE) YoY rose by 3.4%, inline with estimates. The Unemployment Rate came inline with expectations at 4.3%. On the geopolitical front, US and Iranian forces traded fresh attacks, seeing the worst flare-up in tensions since the ceasefire started, with little progress toward an interim peace deal.
Looking at equity markets, the S&P and Nasdaq ended sharply lower by 2.6% and 4.2% respectively. US IG CDS spreads widened by 1.7bp and HY CDS spreads widened 7.3bp. European equity markets ended mixed. European IG CDS spreads were 0.5bp wider and Crossover spreads widened by 2.3bp. Asian equity markets have opened lower this morning. Asia ex-Japan CDS spreads widened by 1.2bp.
New Bond Issues
- CCB (HK Branch) $ 3Y FRN/5Y FRN at SOFR+90bp/SOFR+100bp areas
New Bonds Pipeline
- Tencent $ two-trancher
Rating Changes
- Fitch Upgrades South Africa to ‘BB’; Outlook Stable
- Fitch Upgrades Shanghai Electric Power to ‘A-‘; Outlook Stable
- Fitch Downgrades Golden Energy and Resources to ‘B’; Outlook Negative
Term of the Day: Fiscal Balance
Fiscal balance is the difference between a government’s total revenue (total taxes and non-debt capital receipts) and its total expenditure. A fiscal deficit is when the government’s expenditure exceeds its income. Fiscal deficits are typically stated as a percentage of the economy’s GDP. A deficit or gap is generally filled by borrowing from the central bank of the country or by raising money from capital markets through debt instruments. A recurring high fiscal deficit implies that the government is spending beyond its means and could lead to a default in an extreme case.
Talking Heads
On Bond Traders Betting on CPI Surge Boosting Case for Fed Pivot
Luigi Buttiglione, LB Macro
Narrative that the Fed will have to cut rates has “vanished, killed by data”
Christophe Boucher, ABN AMRO Investment Solutions
“If Kevin Warsh was hoping to cut rates upon his arrival, that now seems impossible… labor market is currently too strong to justify a rate cut”
On Once a Turkey Bull, Algebris Shifts to CDS as Credit Risks Rise
“We believe it is time to sell Turkey rather than buy… Seeing a default in Turkey is very difficult, but it is not a country where you can rule out a default… Reserves are low compared to local dollars, and local dollar deposits plus the stock of debt are also very high relative to reserves”
On Maintaining Lonely Call for Fed Rate Cuts – Citigroup Economists
May employment report “will have Fed officials hawkishly focused on upside risk to inflation, rather than downside risk to employment” … That will lead the market “to return to pricing-in the potential for cuts rather than a likelihood of hikes”… forecast remains for quarter-point rate cuts by the Fed at each of its last three meetings of the year, in September, October and December.
Top Gainers and Losers- 08-Jun-26*
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