Global Fixed Income Report - June 5, 2026
US Treasuries
The U.S. curve delivered a bear flattener: yields rose across the core curve, led by the 2Y–5Y sector, while long-end yields rose more modestly. For portfolio positioning, this argues for neutral-to-short duration in the belly, selective exposure to front-end carry, and continued but disciplined allocation to high-quality credit where spreads still compensate for macro uncertainty. The 2Y yield rose 12 bps, the 5Y rose 11 bps, the 10Yrose 8 bps, and the 30Y rose only 2 bps, compressing 2s10s from roughly 42 bps to 38 bps.
The primary economic drivers for the week centered on resilient labor and manufacturing data carrying over from the prior month. U.S. real GDP expanded at an annualized 1.6% in Q1 2026, below the San Francisco Fed’s 2.0% longer-run trend estimate. NFP May 2026 came at 172k, higher than surveyed 88k. Average hourly earnings YoY was at 3.4%, in-linewith surveyed 3.4%. Unemployment Rate was at 4.3%, in-line with surveyed 4.3%.
The market is likely to keep pricing a narrow path for easing. Growth is not weak enough to force immediate policy relief, while inflation persistence limits the Fed’s willingness to validate aggressive rate-cut expectations. This combination keeps the front end relatively anchored by policy expectations but leaves the belly vulnerable to repricing if incoming inflation data remain firm.
The ICE BofA Single-A US Corporate Index Effective Yield spread over the average US Treasury yield tightened from 92 basis points to 86 basis points.
Based on the market behaviour and expectations, our position is to maintain underweight duration in the 2Y–5Y sector until the market receives clearer confirmation that inflation momentum is moderating. Investors requiring income should favor short-to-intermediate high-quality corporates over long-duration credit, as spread compression has reduced the margin for error. Avoid adding aggressive long-end duration solely on valuation grounds; the 30Y remains exposed to term-premium risk if inflation expectations or fiscal concerns
reprice further.
