Fixed Income Morning Economic Report 10-26-26

Good morning and happy Monday!!

Slightly mixed start to the week for fixed income. Initial strength was a function of the energy pullback; however, benchmarks remain at elevated levels given the punchy rhetoric. USTs are trading 106-04 down 1 tick in 106-00+ to 106-10+ range, they were firmer early doors, and the 106-10+ peak was just shy of last week’s highs at 106-14+ and 106-16+ from Friday and Thursday respectively. This week is, of course, dominated by the Fed on Wednesday and we have SFRZ6 trading at 95.81 having had a 95.805 to 95.83 range so still building in 30bp of hikes this year, which is implying a distribution of a 9% hike for October, 79% for Dec and 35% for Jan. Ahead of that, geopolitics will continue to influence, and by extension the recent growth/inflation discourse will feature, before PCE post-Fed. The latest reports by The New York Times, suggests that a ‘short but intensive’ operation against Iran will take place soon. Mike Waltz, the US ambassador to the UN, said in an interview with the Financial Times that the conflict in the Middle East could drag on for another year, if not longer. Hopefully, that will not be the case, or it'll be a crashing economy and demand destruction that will be replacing supply concerns.

On the docket today; No events scheduled