CAM Investment Grade Weekly Insights
This week credit spreads were tighter and Treasury yields were higher. The OAS on the Corporate Index closed at 78 on Thursday September 10th after closing the week prior at 80. The 10yr Treasury ended last week at 4.78% and it closed at 4.96% on Thursday evening. Through Thursday, the Corporate Bond Index year-to-date total return was -1.44% and the yield to maturity for the index was 5.71%. This is the highest yield offered by the index since April 2024.
Bond Market Weekly
The week immediately following Labor Day is very typically one of the busiest of the year and IG borrowers priced $68bln of new debt relative to the consensus estimate of $70bln. Treasury and equity volatility helped to reveal some attractive new issue concessions. YTD issuance has now pushed past the $1.5 trillion mark which is more than 30% ahead of 2025’s pace. Next week, syndicate desks are looking for $55bln in new supply.
Credit spreads have been remarkably stable for the past six months, rangebound between 70 and 80 basis points, even in the face of wild swings in oil prices and geopolitical instability. Treasuries, on the other hand, have been quite volatile in recent weeks, especially this week. There is a myriad of reasons for the sell-off in rates, but the lack of progress in Iran and sharply higher commodity prices are the main driver, in our view. It doesn’t help matters when President Trump claims that every American will receive a $5,000 economic stimulus at a cost of more than $1 trillion-plus to the U.S. Treasury.[i] Treasury Secretary Scott Bessent moved to calm the Treasury market this Wednesday with an announcement that the Treasury Department would repurchase $6bln worth of longer dated government bonds. While this was slightly more than the $4bln baseline that he had previously mentioned, but investors were disappointed, as expectations had shifted toward a larger number. This is the problem with these operations –they can backfire and that is what happened here at least for the short term. One could argue that Treasury yields would be lower right now if Bessent had not intervened at all. Still, corporate bonds are not Treasuries, and corporate credit spreads have helped dampen the blow of higher Treasury yields. High yield corporates are positive YTD while investment grade corporates are only modestly in the red. IG credit looks compelling with the yield on the Corporate Index at its highest level in 2.5 years.
On the economic front, this week gave us some heavy appetizers in the form of PPI and CPI with both releases matching economist estimates. The main course is the FOMC meeting next Wednesday. As of Friday morning, traders were pricing an 88% chance of a +25bp hike based on Fed Funds futures. In our opinion the Fed is in a bit of a conundrum because two of the main drivers of inflation are spending related to artificial intelligence and higher oil prices due to the conflict with Iran. The Fed can hike as much as it wants and it will not change the behavior of AI hyperscalers that can afford higher borrowing costs nor will it have any impact on the Iranian regime. We think that the FOMC probably knows this so there is an outside chance that they may hold the line next week but ultimately a hike seems like a foregone conclusion at this point. Interestingly, traders are not looking for much of a hiking cycle, with a mere 3.4 hikes priced between now and the beginning of 2028.[i]
Flows
According to LSEG Lipper, for the week ended September 9th, short and intermediate investment-grade bond funds reported a net inflow of +3.88bln. 2026 year-to-date net flows are +$102.5bln.
This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results
[1] CNBC, September 10 2026, “Trump’s $1 trillion-plus ‘dividend’ plan meets immediate bipartisan pushback”
[1] Bloomberg, September 11 2026 10:07 AM EST, “World Interest Rate Probability”