Credit markets hold firm while sovereign bonds digest the adjustment in Japanese yields

Upward pressures on long-term rates

Long term rates decline and credit spreads tighten amid an eventful start of the year

Higher global yields and curve steepening weighed on bond returns while credit and EM spreads were stable last week.

Rangebound interest rates and credit spreads will require bond investors to focus on the yield carry and to be selective in sectors and companies’ exposure

A near end to the central bank rate cut cycle, some major divergences in sovereign rates and broadly tighter credit and EM spreads

A “not so hawkish” Fed rate cut and ECB Schnabel’s comments drove a yield curve bear steepening last week.

A shift in the 2026 central bank outlook contributes to driving rates higher, as fiscal policy supports growth and inflation prospects across all major regions

A quasi-certain Fed rate cut in December, the end of the QT program and a rebound in sentiment toward credit and EM Debt lifted bond markets last week

A repricing of Fed rate cut odds pushes USD yields lower, while credit spreads widen