Category: Insight

09 Oct 2026
Insight, Investment Grade Quarterly CAM Team 0 comment

2026 Q3 Investment Grade Quarterly

Third Quarter Commentary & Outlook
October 2026

It was a difficult environment for the investment grade bond market during the third period of the year. Wider credit spreads and meaningfully higher interest rates led to negative returns for the asset class.

Third Quarter Recap
The third quarter brought increased volatility with each passing day, and especially in the final few weeks of the period. Although spreads were modestly wider, they traded within a remarkably tight range and were quite stable until the very end of the quarter. The option adjusted spread (OAS) for the Bloomberg US Corporate Bond Index (The Index) opened the period at 74 and moved to an OAS of 80 at quarter-end.

Interest rates were the culprit behind most of the headwinds during the quarter, as Treasury yields inched higher throughout September. By quarter-end, the 2yr, 5yr and 10yr Treasuries had moved 72, 86, and 82 basis points higher, respectively. The 10yr Treasury closed at 5.29% on the last day of the quarter, marking its highest level since 2002.

New World Order
Higher yields are not a uniquely American phenomenon. Numerous developed global economies have also seen yields rise to multiyear highs. In Japan, yields have reached a generational high. There are dozens of factors that are contributing to the rise in global yields; in some cases, these are idiosyncratic issues related to individual economies, but the spike in oil prices has been a major contributor to higher rates across the globe.

Looking specifically at investment grade credit, the yield to maturity for The Index closed the quarter above 6%.

The Index has only closed above 6% 41 times (1.61%) over the course of the past decade. Going back over the past 20 years, The Index has closed above 6% 372 times out of a possible 5,054 trading days (7.36% of the time). The 20-year period encompasses the Great Financial Crisis of 2007-2009. The Index closed as high as 9.09% during the worst of the GFC.

While recent bouts of interest rate volatility present challenges for short term performance, the level of yield available without the need to incur much credit risk or duration risk leaves us optimistic about returns over longer time horizons.

No Bad Bonds, Just Bad Prices
We have written at length throughout the year about the volume of issuance within the investment grade primary market, and it remains on a record-shattering pace. New issuance presents opportunities for investors who are able to adequately assess risk-reward. Companies often have to offer a new issue “concession” to provide incentive for investors to buy their new bonds. This comes in the form of pricing the bonds at a spread discount to the existing debt of the company, or that of suitable comparable companies, if the issuer has no outstanding bonds.

For a straight refinance of existing debt from a solid IG-rated company, the new issue concession might be a mere 3-5 basis points, which could well be enough compensation for the risk. For a large debt issuance to fund M&A with some questions about the credibility of the deleveraging plan and/or the likelihood of projected synergy realization, then the concession will likely be much larger. Last quarter we wrote about SpaceX’s inaugural $25bln debt issuance and its woeful performance. This quarter it was Paramount Skydance that saw its newly minted bonds flounder. In the final days of the third quarter, the company sold $30bln of investment-grade debt, $12.4bln of junk bonds and $9.46bln of loans.i

According to data compiled by Bloomberg, investors lost more than $100 million within hours of the bond deal being completed.ii The bonds have since recovered some of their value, but most maturities remain underwater relative to where they priced initially. Much of the problem with this particular deal stemmed from the fact that it contained a high-yield component and a leveraged loan component. The junk-rated riskier portion of the deal was not properly priced, in our opinion, which caused the investment-grade portion of the deal to underperform in sympathy. As an active bond manager that has corporate credit strategies across the entire rating spectrum, we are uniquely positioned to evaluate situations like these. The investment banks that syndicate debt offerings are working for the issuing company, not for investors. It is the responsibility of investors and fiduciaries to determine if the compensation adequately compensates for the risk of any particular bond offering.

FOMC Spotlight
There were two FOMC decisions during the quarter. The Fed held rates steady on July 29th before delivering a “credibility hike” on September 16th. Inflation has been running above target for too long and Warsh telegraphed a strong possibility of a hike in the weeks leading up to the September meeting, making the decision a foregone conclusion. We still have questions about the effectiveness of what we expect to be an abbreviated tightening cycle, and we find it hard to envision a scenario where the Fed delivers more than one or two additional hikes. If it ends up being a three-hike cycle, then that would effectively remove the three “insurance cuts” that the Fed delivered at the end of 2025.

We remain skeptical about the efficacy of tightening financial conditions because higher policy rates target demand by increasing the cost of borrowing funds; however, current inflationary pressures are related to supply. The level of the FOMC policy rate has no effect on geopolitical turmoil and the resulting impacts on energy costs. At the end of the third quarter, West Texas crude was up nearly 60% YTD and Brent Crude had increased almost 70%. U.S. diesel prices are near all-time highs. These factors are well outside of the Fed’s control. If the U.S. and Iran can reach an agreement, inflationary pressures could ease rapidly. As of early October, Fed Funds Futures were pricing a +19.4% chance of a hike at the October 28th meeting and a +83.6% chance at the December 9th meeting.iii

Better Times on The Horizon
It wasn’t an enjoyable quarter from a total return perspective, but we think it will be a blip on the radar over the long haul. The compensation currently afforded by intermediate-maturity investment grade corporate bonds is extremely attractive relative to any period in the recent past. Importantly, these yields are available without requiring investors to take excessive duration or credit risk. The investment-grade credit market is healthy and functioning at a high level. These factors allow bonds to serve as a powerful tool in the overall asset allocation of any investor.

We appreciate your interest and the trust that you have placed in our team to manage your fixed income investments.

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. Past performance is not a guarantee of future results. Gross of advisory fee performance does not reflect the deduction of investment advisory fees. Our advisory fees are disclosed in Form ADV Part 2A. Accounts managed through brokerage firm programs usually will include additional fees. Returns are calculated monthly in U.S. dollars and include reinvestment of dividends and interest. The Index is unmanaged and does not take into account fees, expenses, and transaction costs. Index returns and related data such as yields and spreads are shown for comparative purposes and is based on information generally available to the public from sources believed to be reliable. No representation is made to its accuracy or completeness.

The information provided in this report should not be considered a recommendation to purchase or sell any particular security. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s portfolio. Fixed income investments have varying degrees of credit risk, interest rate risk, default risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. There is no assurance that any securities discussed herein have been held or will be held in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed do not represent an account’s entire portfolio and, in the aggregate, may represent only a small percentage of an account’s portfolio holdings, if any. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that the investment decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. Upon request, Cincinnati Asset Management will furnish a list of all security recommendations made within the past year.

Additional disclosures on the material risks and potential benefits of investing in corporate bonds are available on our website: https://www.cambonds.com/disclosure-statements/

i Bloomberg, September 30 2026, “Paramount Wraps Up $52 Billion Debt Sale to Fund Warner Buyout”
ii Bloomberg, October 1 2026, “Bond Traders Lash Out at BofA, Citi as Paramount’s Debt Craters”
iii Bloomberg, October 6 2026 2:42 PM EST, “World Interest Rate Probability”

09 Oct 2026
High Yield Quarterly, Insight CAM Team 0 comment

2026 Q3 High Yield Quarterly

Third Quarter Commentary & Outlook
October 2026

In the third quarter of 2026, the Bloomberg US Corporate High Yield Index (“Index”) return was -1.82% bringing the year to date (“YTD”) return to 0.10%. The S&P 500 index return was 2.30% (including dividends reinvested) bringing the YTD return to 12.73%. Over the period, while the 10 year Treasury yield increased 82 basis points, the Index option adjusted spread (“OAS”) widened 41 basis points moving from 270 basis points to 311 basis points.

With regard to ratings segments of the High Yield Market, BB rated securities widened 31 basis points, B rated securities widened 24 basis points, and CCC rated securities widened 237 basis points. The chart below from Bloomberg displays the spread move of the Index over the past five years. For reference, the average level over that time period was 343 basis points.

The sector and industry returns in this paragraph are all Index return numbers. The Index is mapped in a manner where the “sector” is broader with the more specific “industry” beneath it. For example, Energy is a “sector” and the “industries” within the Energy sector include independent energy, integrated energy, midstream, oil field services, and refining. The Other Financials, Brokerage, and Energy sectors were the best performers during the quarter, posting returns of -0.05%, -0.24%, and -0.62%, respectively. On the other hand, Natural Gas, Communications, and Insurance were the worst performing sectors, posting returns of -5.67%, -3.68%, and -2.77%, respectively. At the industry level, pharma, refining, and independent energy all posted the best returns. The pharma industry posted the highest return of 2.39%. The lowest performing industries during the quarter were wirelines, railroads, and wireless. The -5.99% posted by the wirelines industry was the lowest return by any industry.

After the very strong issuance of 2025, Q1 posted a robust $92.7 billion in new issuance, Q2 was even stronger at $127.7 billion, and followed by the $127.9 billion for Q3. Of the issuance that did take place during Q3, Communications took 51% of the market share followed by Financials at 12% share, and Discretionary at 10% share.

The Federal Reserve held the Target Rate steady at the July meeting but raised rates a quarter point for the first time in over three years at the September meeting. There was no meeting held in August. “We removed a dose of accommodation so that financial and credit conditions would be more consistent with our ultimate objectives,” Fed Chair Kevin Warsh said during a press conference following the September decision. “Today’s action starts to show we’re serious about this, and we will deliver on the price stability objective.”i The Fed still has concerns regarding inflation that has been persistently above their 2% target for years. In his remarks to reporters, Warsh restated his concerns over inflation, saying too many categories of products and services were showing annualized price gains above 3%. “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved,” he said. The Fed did release updated rate projections showing that sixteen officials projected at least one additional increase this year, up from six in June who saw at least two total increases in 2026. For their part, market participants are also forecasting one additional hike in the Fed Target rate for 2026.ii

Intermediate Treasuries increased 82 basis points over the quarter, as the 10-year Treasury yield was at 4.47% on June 30th, and 5.29% at the end of the third quarter. The 5-year Treasury increased 86 basis points over the quarter, moving from 4.23% on June 30th, to 5.09% at the end of the third quarter. Intermediate term yields more often reflect GDP and expectations for future economic growth and inflation rather than actions taken by the FOMC to adjust the target rate. The revised second quarter GDP print was 2.2% (quarter over quarter annualized rate). Looking forward, the current consensus view of economists suggests a GDP for 2026 around 2.2% with inflation expectations around 3.6%.iii

Being a more conservative asset manager, Cincinnati Asset Management does not buy CCC and lower rated securities. Additionally, our interest rate agnostic philosophy keeps us generally positioned in the five to ten year maturity timeframe. During Q3, essentially the entire attribution story revolved around the steady and persistent climb of US Treasury securities. The bright spots in the portfolio including our underweight in communications and our credit selections within communications, utilities, and banking were overshadowed by the negative drag of the Treasury move. As mentioned, our positioning leaves us overweight the 5 to 10 year maturity bucket and this bucket bore the brunt of the negative performance for the quarter. Our performance detractors this quarter, mainly credit selections within technology, basic industry, and consumer cyclicals held a common theme of maturities that are 2033 and beyond.

The Bloomberg US Corporate High Yield Index ended the third quarter with a yield of 8.35%. Treasury volatility, as measured by the Merrill Lynch Option Volatility Estimate (“MOVE” Index), had a spike to 110, a level well above the 80 index average of the past 10 years, as the Treasury market continued the march higher in rates into quarter end. Data available through August shows 20 bond defaults so far in 2026 which is relative to 16 defaults in all of 2022, 41 defaults in all of 2023, 34 defaults in all of 2024, and 33 defaults in all of 2025. The trailing twelve month dollar-weighted bond default rate is 2.27%.iv The current default rate is relative to the 1.83%, 1.52%, 1.66%, 2.46% default rates from the previous four quarter end data points listed oldest to most recent. Defaults are generally stable and the fundamentals of high yield companies are in decent shape. From a technical view, fund flows are negative this year through August data at -$1.8 billion.v No doubt there are risks, but we are of the belief that for clients that have an investment horizon over a complete market cycle, high yield deserves to be considered as part of the portfolio allocation.

The continual move higher in rates has pushed the 10 year US Treasury to a level not seen in about 20 years. There are quite a few reasons for the move including elevated fuel prices from a protracted Iran war, worries about US fiscal health, and surging artificial intelligence spending. Along with these higher rates, many things like buying a house, feeding a family, and filling up a gas tank are costing more. Given all the current puts and takes, Fed Chair Warsh noted that “you begin to appreciate the resilience of the U.S. economy.” That is true, however, for months, wage gains haven’t kept pace with inflation which puts affordability back in the spotlight just before midterm elections that will determine control of Congress. There will certainly be plenty to evaluate as we wrap up the rest of 2026. Our exercise of discipline and credit selectivity is important as we continue to evaluate that the given compensation for the perceived level of risk remains appropriate. As always, we will continue our search for value and adjust positions as we uncover compelling situations. Finally, we are very grateful for the trust placed in our team to manage your capital.

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. Gross of advisory fee performance does not reflect the deduction of investment advisory fees. Our advisory fees are disclosed in Form ADV Part 2A. Accounts managed through brokerage firm programs usually will include additional fees. Returns are calculated monthly in U.S. dollars and include reinvestment of dividends and interest. The index is unmanaged and does not take into account fees, expenses, and transaction costs. It is shown for comparative purposes and is based on information generally available to the public from sources believed to be reliable. No representation is made to its accuracy or completeness. Additional disclosures on the material risks and potential benefits of investing in corporate bonds are available on our website: https://www.cambonds.com/disclosure-statements/.

i Bloomberg September 16, 2026: Fed Raises Rates to Curb Inflation
ii Bloomberg October 1, 2026: World Interest Rate Probability
iii Bloomberg October 1, 2026: Economic Forecasts (ECFC)
iv Moody’s September 16, 2026: August 2026 Default Report and data file
v Bloomberg October 1, 2026: Fund Flows

02 Oct 2026
Insight, Investment Grade Weekly Josh Adams - Portfolio Manager 0 comment

CAM Investment Grade Weekly Insights

Credit spreads were wider this week while Treasury yields continued to move higher.  The OAS on the Corporate Index closed at 83 on Thursday October 1st after closing the week prior at 80.  The 10yr Treasury ended last week at 5.16% and it closed at 5.24% on Thursday evening.  Through Thursday, the Corporate Bond Index year-to-date total return was -2.96% and the yield to maturity for the index was 6.01%.  The index has closed above 6% on just 42 trading days over the past 15 years.

 

 

 

Bond Market Weekly

Investment grade supply underwhelmed this week as $32.6bln priced relative to the $50bln estimate.  Paramount was responsible for $30bln of this investment grade supply and the company also priced $11.4bln of high yield debt and $8.5bln worth of leveraged loan debt.  We think that Paramount used much of the oxygen in the room this week and that is why other issuers were hesitant to venture into the market.  It did not help matters that Treasury yields were volatile and Paramount bonds performed extremely poorly the day after issuance. Paramount bonds have since regained some value, but most maturities are still trading at a discount to where they priced on a spread basis.  Syndicate desks are looking for $25-$30bln of supply next week.  YTD issuance now stands at $1.676 trillion.

Treasury yields dominated the news flow again this week as the 10yr moved past 5.34%, its highest level since April 2002.  Yields moved lower in the second half of the week.  The September non-farm payroll report was released on Friday morning and it was much weaker than expected.  Economists were looking for an addition of +90k jobs during the month but the actual number came in at just +29k and the August number was revised lower from +162k to +133k (which is still a solid number for August).  Interest rate futures reacted to the weak payroll report; as we went to print they were pricing just a 20.5% chance of a hike at the next FOMC meeting on October 28th.  Earlier in the week this figure was as high as 70.3%.

 

Flows

According to LSEG Lipper, for the week ended September 30th, short and intermediate investment-grade bond funds reported a net outflow of -2.3bln.  2026 year-to-date net flows are +$101.3bln.

 

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 prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

25 Sep 2026
High Yield Weekly, Insight Rich Balestra - Portfolio Manager 0 comment

CAM High Yield Weekly Insights

(Bloomberg)  High Yield Market Highlights

 

 

  • The selloff in junk bonds extended for a third straight session, driving yields to a new 17-month high and risk premiums to the widest in eight weeks as rising oil prices intensified inflation fears.
  • The losses swept across ratings as Treasury yields pushed higher, pushing broad junk bond yields past 8%. CCC yields surged to 14.5%, the highest since November 2023.
  • Despite the broad risk-off move this week, borrowers continued flood the primary market. Nine deals for more than $17b priced this week, marking the busiest week since September 2025.
  • An even bigger supply wave looms, with Paramount preparing to launch about $44b of investment grade and high-yield bonds early next week. It is already marketing a $7.5b term loan across USD and euros.
  • Optimistic macro backdrop and higher yields would continue to support demand and keep spreads range bound, Brad Rogoff and Dominique Toublan of Barclays wrote in a Friday morning note.

 

(Bloomberg)  US Consumer Sentiment Falls on Worries About Prices, Economy

  • US consumer sentiment fell in September to a four-month low amid deepening worries about rising prices and the outlook for the economy.
  • The University of Michigan’s final sentiment index decreased to 48.1 in September from a month earlier, according to the survey released Friday.
  • Consumers expect prices to rise 4.6% over the next year, up from 4% in the previous month. They also saw costs rising at an annual rate of 3.4% over the next five to 10 years, the highest since May.
  • Consumer sentiment deteriorated in September as diesel prices hit a record and gasoline prices climbed. Higher prices at the pump are exacerbating workers’ longstanding frustrations about the cost of living in the US.
  • Inflation remains stubbornly elevated. Prices are rising faster than paychecks, and mortgage rates have surged above 7%, pushing homeownership even further out of reach for many.
  • “Despite political differences, consumers unanimously believe that the outlook for the economy has diminished,” Joanne Hsu, director of the survey, said in a statement.
  • Since the start of the year, consumer sentiment has declined for all groups by age, education, geography, political party and income, according to the report.
  • A gauge of the outlook for the economy in the year ahead slumped in September to the lowest since 2022. Consumers’ expectations for their personal finances also deteriorated.
  • Buying conditions for durable goods improved slightly, but it was partly “due to a perception that completing such purchases now would help consumers avoid higher prices in the future,” Hsu said.
  • An index of consumer expectations dropped to a four-month low, and the current conditions gauge also fell.
  • The survey period includes responses from Aug. 25 to Sept. 21.

 

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.

25 Sep 2026
Insight, Investment Grade Weekly Josh Adams - Portfolio Manager 0 comment

CAM Investment Grade Weekly Insights

Credit spreads drifted wider this week while Treasury yields climbed higher.  The OAS on the Corporate Index closed at 77 on Thursday September 24th after closing the week prior at 75.  The 10yr Treasury ended last week at 5% and it closed at 5.2% on Thursday evening.  Through Thursday, the Corporate Bond Index year-to-date total return was -2.46% and the yield to maturity for the index was 5.95%.

 

 

 

Bond Market Weekly

Investment grade borrowers priced $35bln of new debt this week which fell short of the $40bln estimate.  Syndicate desks are looking for $50bln in supply next week.  The calendar will be tilted toward the front end of the week as borrowers are likely to stay at bay on Wednesday and Friday with the release of inflation readings and the nonfarm payroll report on each of those mornings, respectively.  There is one jumbo-issuer in the on-deck circle in the name of Paramount, as it cleared the final hurdles for its acquisition of Warner Brothers.  Paramount has been meeting with investors this week in preparation for its imminent capital raise that will occur across a variety of fixed income asset classes, including loans, high yield credit and investment grade credit.  YTD issuance now stands at $1.644 trillion.  Next week, dealer forecasts are calling for new issue supply of $50bln.

Treasury yields dominated the news flow this week in the financial markets.  The UST 30yr hit an intraday high of 5.5%, its highest level since June 2004 while UST 10yr traded up to 5.22%, its high-water mark since June 2007.  We sense that rates have now gone too far but also have the view that it is impossible to accurately predict the direction of interest rates over longer time horizons.  There is no easy answer for the latest move and there are a variety of factors that are contributing to higher rates.  Higher fuel prices, government deficits and inflation concerns are but a few of the reasons.  There is also the issue of higher yields elsewhere around the world –take for instance Japan, where the JGB 10yr hit its highest level since the late 1990s and the JGB 30yr reached an all-time high of 4.22%.

While it is unpleasant to deal with this level of volatility in interest rates, investors can take comfort in the fact that higher yields provide a meaningful level of downside protection.  We will run through a basic example to illustrate.  As of September 24th, the Bloomberg US Corporate Bond Index had an option adjusted duration of 6.41 and a yield to worst of 5.95%.  If an investor purchased an individual bond with a 6.4 duration and a 6% coupon, and the next day Treasury yields moved up 100bps in a linear fashion (this never happens but this is a simplistic example) then the effect of the duration would result in a 6.41% decrease in the value of that particular bond.  Note we are also making the assumption that the bond experiences no change in the credit spread at which it trades (something that is very unlikely).  If the investor continues to hold that bond for a period of 12 months while credit spreads and Treasury yields remain unchanged then that investor will have clipped 6% worth of coupon while posting a total return of -0.41% for the 1yr holding period.  In other words, one year of coupon almost totally negates the value that the bond lost due to the move higher in rates.  And remember, the investor gets that coupon every year that they hold the bond.  Note that we are also ignoring the fact that the bond’s duration will be lower after holding it for one year and thus the simple march toward maturity will have helped the bond to regain some of its value over time.  This example is somewhat extreme given the sharp 100bp move higher in rates, it is an individual bond and not a diversified portfolio, credit spreads didn’t move, and neither did Treasuries.  If spreads were to move lower during the previous example then the investor could even post a positive total return on the holding in the face of a 100bp move higher in Treasury yields.  This is the power of higher yield/coupon.

Flows

According to LSEG Lipper, for the week ended September 23rd, short and intermediate investment-grade bond funds reported a net inflow of +1.79bln.  2026 year-to-date net flows are +$103.6bln.

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.

 

 

18 Sep 2026
High Yield Weekly, Insight Rich Balestra - Portfolio Manager 0 comment

CAM High Yield Weekly Insights

(Bloomberg)  High Yield Market Highlights

 

 

  • After the Federal Reserve delivered a quarter-point rate hike and oil prices retreated for a second consecutive session, there was a bit of optimism that inflation can be contained without disrupting growth. The Federal Reserve, in fact, lifted growth forecasts for 2026 and 2027 to 2.3% and 2.4%, respectively, from 2.2% and 2.3%.
  • The Fed move bolstered the primary market as spread compression continued, while higher yields powered robust demand.
  • The primary market is expected to see a steady stream of supply powered by tight spreads, steady yields against the backdrop of steady growth, strong corporate balance sheets, and low defaults

 

(Bloomberg)  Fed Raises Rates to Curb Inflation

  • The Federal Reserve raised interest rates by a quarter percentage point and penciled in an additional hike later this year, steps aimed at containing inflation.
  • “We removed a dose of accommodation so that financial and credit conditions would be more consistent with our ultimate objectives,” Warsh said during a press conference following the decision. “Today’s action starts to show we’re serious about this, and we will deliver on the price stability objective.”
  • The Federal Open Market Committee voted unanimously to increase the benchmark federal funds rate to a range of 3.75% to 4% on Wednesday. It was the US central bank’s first rate increase since July 2023.
  • In his remarks to reporters, Warsh restated his concerns over inflation, saying too many categories of products and services were showing annualized price gains above 3% on a 6- and 12-month basis.
  • “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved,” he said.
  • His comment on removing a “dose of accommodation” also drew attention from Fed watchers.
  • “That’s hawkish. If the chair thinks policy is accommodative, then you’ve got more work to do,” said Michael Gapen, chief US economist for Morgan Stanley.
  • Two-year Treasury yields — the most sensitive to the Fed’s policy — erased an earlier decline to trade at 4.73%, more than 12 basis points higher than they were before the announcement.
  • “Clearly, the Fed is more concerned about inflation at the moment,” said Oscar Muñoz, chief macro strategist at TD Securities. “That’s why they hiked today, and it seems like there are more hikes in the pipeline.”
  • In a new set of rate projections released Wednesday, Fed officials’ median outlook for interest rates at the end of 2026 rose to 4.1% from 3.8%, signaling growing support for a series of rate hikes.
  • Sixteen officials projected at least one additional increase this year, up from six in June who saw at least two total increases in 2026. The median projection for 2027 pointed to no additional rate hikes next year. However, eight policymakers favored moving another quarter point higher by the end of 2027 compared to where rates stand now.
  • As in June, when Warsh declined to submit his own forecasts, only 18 of 19 officials provided rate projections for 2026 and 2027.
  • The rate increase comes after the Bureau of Labor Statistics reported last week that core inflation rose at a hotter-than-expected pace in August. That added to growing concern that inflationary pressures may be broadening beyond the temporary effect of tariffs and the Iran war’s impact on energy prices.
  • Warsh emphasized how well the US economy is performing and repeated that officials don’t see broad financial conditions as restraining growth.
  • “The American economy appears to be strengthening,” he said. “Given that resilience and the potential for even greater performance, an attitude of optimism is exactly what I heard inside the FOMC these last two days.”
  • Warsh warned last month that inflation was not meaningfully slowing, opening the door to policy tightening.
  • In the committee’s post-meeting statement Wednesday, officials again characterized inflation as elevated, yet also described the economy in positive terms.
  • “Productivity growth is strong, and capital investment is robust,” officials said. “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
  • Officials repeated a promise to deliver on price stability. But even with the rate hike, they pushed out by one year their expectation for when inflation would return to 2%. The median forecast now sees it reaching that level in 2029.
  • Support for higher rates has been slowly building within the Fed all year. At their July meeting, officials left rates unchanged, but three regional Fed bank presidents — Lorie Logan of Dallas, Cleveland’s Beth Hammack and Minneapolis’ Neel Kashkari — dissented in favor of a rate hike.
  • Minutes from that gathering showed many officials indicated policy tightening would be necessary if inflation didn’t decline.

 

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.

 

18 Sep 2026
Insight, Investment Grade Weekly Josh Adams - Portfolio Manager 0 comment

CAM Investment Grade Weekly Insights

This week credit spreads were tighter and Treasury yields bounced around and were relatively unchanged during the period as went to print on Friday.  The OAS on the Corporate Index closed at 76 on Thursday September 17th after closing the week prior at 79.  The 10yr Treasury ended last week at 4.97% and it closed at 4.93% on Thursday evening.  Through Thursday, the Corporate Bond Index year-to-date total return was -1.02% and the yield to maturity for the index was 5.70%.

 

 

 

 

 

Bond Market Weekly

It was a busy week for the investment grade primary market, but volume came up just shy of the $55bln forecast.  The shortfall can largely be attributed to a somewhat volatile backdrop for risk assets on Tuesday as equities sunk and Treasury yields inched higher.  The FOMC on Wednesday always keeps issuers on the sidelines. There was a return to normalcy on Thursday morning with a fresh slate of deals.  Corporate borrowers priced $53.7 of new investment grade debt during the week.  YTD issuance now stands at $1.585 trillion.  Next week, dealer forecasts are calling for new issue supply of $40bln.

 

 

The main economic event of the week was the FOMC delivering its first policy rate increase since July 2023.  Although this was largely anticipated with interest rate futures pricing a 90+% probability in the days leading up to the meeting, there were some very valid arguments for the Fed to have held rates steady.  Much of the recent heat on the inflation front has come from supply driven shocks related to tariffs and geopolitical turmoil in the middle east as well as investor concern over the growing U.S. national debt –these are items that the Fed simply cannot influence with changes in the policy rate.  Despite this, we do think it was necessary for the Fed to hike in order to establish gravitas with the Treasury market and signal that inflation is not improving with sufficient speed.  Case in point, Treasury yields actually moved lower the day immediately following the FOMC meeting.

 

 

Barring a spate of softer inflation readings, we would expect another 1-2 hikes over the next 12 months with up to three 25bp hikes to complete the current tightening cycle.  This would effectively remove the 75bps of cuts that the Fed had delivered at the end of 2025 but it would not reverse the 75bps of cuts that occurred in 2024.  There has only been one example in recent history where a Federal Reserve hiked only once during a tightening cycle.  That occurred in March 1997, but that was unique, because the Asian financial crisis began in July 1997, followed closely by a Russian default and the fall of Long-Term Capital Management.  This prompted the Fed to begin cutting rapidly in September of 1998 to provide accommodation to the financial markets.

The next FOMC meeting is not until October 28th, so there will be plenty of economic data to parse over the next 40 days.  As we go to print, interest rate futures are split as to whether the Fed will elect to move forward with a second hike during this cycle at the October meeting.

 

Flows

According to LSEG Lipper, for the week ended September 16th, short and intermediate investment-grade bond funds reported a net outflow of +0.639bln.  2026 year-to-date net flows are +$101.9bln.

 

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.

11 Sep 2026
High Yield Weekly, Insight CAM_RIA 0 comment

CAM High Yield Weekly Insights

(Bloomberg)  High Yield Market Highlights

  • US junk bonds suffered their worst one-day selloff since March, with yields surging to a five-month high, as spiking oil prices hit Treasuries. The yields on 5-year and 10-year US debt climbed to a near three-year high.
  • The rally in oil prices for a third straight session fueled losses in equities and bonds on renewed bets that the Federal Reserve will raise interest rates soon.
  • The broad risk aversion pushed CCC yields to new three-year high of 13.57% and spreads to a fresh two-year high of 885 basis points.
  • Average yields jumped 15 basis points to 7.63%, the biggest one-day increase since March. CCC yields rose 20 basis points, the biggest one-day jump since June. CCCs also racked up their biggest one-day loss since March
  • Meanwhile, US borrowers are rushing to sell debt ahead of the Fed meeting next week
  • Lots of new deals priced, taking the week’s tally to $12b, the busiest week since early June
  • The calendar is expected to continue to build in the coming weeks.

 

(Bloomberg)  US Core CPI Tops Forecasts, Bolstering Case for Rate Hike

  • A key gauge of US consumer prices reported August numbers Friday morning, bolstering the case for Federal Reserve officials to raise interest rates next week.
  • The consumer price index, excluding food and energy, climbed 0.3% in August from a month earlier, according to Bureau of Labor Statistics data out Friday. The median estimate in a Bloomberg survey called for a 0.2% increase. On an annual basis, it advanced 2.4%.
  • Futures showed investors priced in a rate hike next week as a near certainty following the release, and put a high likelihood on a second increase before the end of the year.
  • The report suggests inflation made little progress toward the Fed’s goal last month amid ongoing pressures from the Iran war, tariffs and the data center buildout. The US central bank will likely see the numbers as tipping the scale in favor of the first rate increase in three years after some officials suggested the Sept. 15-16 decision could come down to what the figures showed.
  • “The renewed march higher in oil, gasoline and diesel prices add to concerns that higher energy prices could spill over to other goods and services and inflation expectations,” Nationwide Chief Economist Kathy Bostjancic said in a note. “As such we are now looking for the Fed to raise rates” next week, she said.
  • Fed Chairman Kevin Warsh has been reluctant to tip his hand on the central bank’s next move, but in a speech last month he said the Fed would “have work to do” if it could not “be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.”
  • The US economy, meanwhile, is contending with resurgent energy prices as the Middle East and Russia-Ukraine wars hit supplies. This week, oil prices pushed above $100 a barrel and US retail diesel prices rose to a record.
  • Friday’s report showed the overall CPI was up 0.4% from the prior month and 3.4% from a year earlier. Energy prices rose 2.1% in August.
  • “It’s not really a report that makes us get more concerned about the inflation outlook,” even if it will lead the Fed to raise rates next week, said Stephen Juneau, a senior economist at Bank of America Corp.
  • Many Americans have been squeezed between rising prices and tepid pay gains. A separate report Friday that combines the inflation figures with recent wage data showed real average hourly earnings fell 0.3% in August from a year earlier, adding to a string of weak readings since the Iran war began.
  • Central banks typically raise interest rates to increase borrowing costs, dampen demand and cool inflation. Fed officials have left rates steady at each of their last five meetings, though at the July gathering, three of them dissented in favor of a quarter-point rate hike.
  • The August CPI report is the last major gauge of inflation before the September gathering. A separate report Thursday showed producer prices rose last month by the most since May, lifted by a surge in energy prices.
  • The Fed’s preferred measure of inflation, the personal consumption expenditures price index, is due at the end of the month. Following Friday’s release, economists at several firms said they expect the core gauge in the PCE report to show a 0.3% increase.

 

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.

11 Sep 2026
Insight, Investment Grade Weekly Josh Adams - Portfolio Manager 0 comment

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”

 

07 Aug 2026
High Yield Weekly, Insight Rich Balestra - Portfolio Manager 0 comment

CAM High Yield Weekly Insights

(Bloomberg)  High Yield Market Highlights

 

 

  • The US junk bond rally fizzled out as uncertainty over the Strait of Hormuz fueled oil prices and expectations of a September Federal Reserve rate hike. High-yield snapped a three—day winning streak despite resilient labor market and strong productivity growth.
  • The rally reversed across ratings. CCC yields jumped 20 basis points to 12.60% and spreads widened 13 basis points to 821.
  • Though the rally lost some momentum on Thursday, resilient macro data, strong corporate earnings and growing evidence of AI-related benefits support risk-on sentiment, Barclays strategists Brad Rogoff and Dominique Toublan wrote on Friday
  • In the primary market, just one $600m deal by OneMain Finance was priced, lifting weekly issuance to $3.3b. Four borrowers sold bonds for $2.7b on Wednesday, lifting year-to-date volume to nearly $201b

 

(Bloomberg)  US Employers Unexpectedly Shed Jobs

  • US employers unexpectedly cut jobs in July and hiring in the prior two months was revised lower, suggesting the labor market is weaker than previously thought after surprising strength earlier this year.
  • Nonfarm payrolls decreased 23,000 last month following a combined 103,000 downward revision to the May and June figures, Bureau of Labor Statistics data showed Friday. The unemployment rate fell to 4.1% as labor force participation continued to slide, and wage growth slowed.
  • The report suggests the labor market may be starting to falter amid rising prices and uncertainty from the Iran war, despite recent data showing strength in consumer spending and business investment. The data could also prompt the Federal Reserve to delay interest-rate increases as officials weigh inflation against risks to employment.
  • US stocks opened higher and Treasury yields fell as investors reduced bets on a Fed rate hike in September. Still, upcoming reports on consumer prices — including data for July next week — could ultimately decide the Fed’s course of action next month.
  • “The soft labor market report should lower market expectations for a Fed rate hike in the coming months, but the inflation reports will be the key focus for Fed officials,” Nationwide Chief Economist Kathy Bostjancic said in a note. “If inflation prints run hot for the next few months, then odds of a rate hike increase.”
  • The decline in jobs was driven by cuts in government, leisure and hospitality and retail trade. Private-sector payrolls rose by 30,000 for a second month, led by healthcare and social assistance.
  • Local government employers shed nearly 60,000 jobs, almost entirely in education, which can be volatile in the summer as many teachers fall off of payrolls before returning again as the school year begins. Federal government payrolls also fell.
  • Leisure and hospitality employment declined to the lowest level in almost a year as restaurants and bars shed staff, suggesting the FIFA World Cup that ended July 19 didn’t provide the boost to payrolls many forecasters had anticipated.
  • The report comes as high-profile companies announced layoffs throughout the month including Microsoft, Uber Technologies Inc. and Visa Inc. Payrolls in the financial activities sector, a key employer of white-collar workers seen as among the most vulnerable to artificial intelligence adoption, fell to the lowest level in four years.
  • Manufacturing and construction payrolls, however, continued to climb. Many economists have pointed to the data-center buildout as a possible driver of demand for construction labor in 2026, even as homebuilding continues to be restrained by high interest rates.
  • The participation rate — the share of the population that is working or looking for work — fell to 61.4%, which excluding the pandemic was the lowest since the 1970s. Among those between the ages of 25 and 54, known as prime-age workers, participation edged higher but remained near the lowest levels of the last few years.
  • Purchasing power will also be a key issue heading into the November midterm elections, especially as the Iran war has further driven up the cost of living. While consumer sentiment rebounded last month, consumers’ views about their current financial situation remain below levels seen in recent years.
  • Other data out this week offered better news. ADP Research said wage gains for private-sector workers who switched jobs picked up in July to the highest in almost a year. Bank of America Institute, meanwhile, found a jump in pay and job gains among lower-income households last month, and a gauge of small-business hiring plans from the National Federation of Independent Business rose to the highest level in almost four years.
  • “This does not look credible to me. The numbers don’t jibe with what we’re seeing more broadly for the labor market,” said Stephen Stanley, the chief economist at Santander US Capital Markets LLC. “If the labor market had weakened as much as the June and July jobs report suggests, we’d be hearing it from Fed officials and the economy, and we’re not.”

 

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.

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