July 22, 2026
CIO Perspective
Elevated Treasury yields typically should reflect the market's views on the risks of lending to the US sovereign, which is in a deteriorating fiscal situation exemplified by a historically high deficit. US corporations, on the other hand, are generally improving their profitability and credit ratings. This convergence in credit quality may result in tighter spreads, all things being equal, which is consistent with what is happening in fixed income markets, outside of AI-related issuance. Given we do not see an aggressive Fed hiking cycle to combat sticky inflation, we believe risk markets are in an appropriate place. They are unlikely to sell off significantly, in our view, though markets could experience pullbacks that are met by increased demand (i.e., the "buy-the-dip" mentality).
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