Global Weekly Fixed Income Report - October 16, 2026
Executive Summary
September's consumer prices came in hot on Wednesday and the bond market rallied anyway. Headline CPI rose 0.6% on the month and 3.7% on the year, up from 3.4%, with gasoline up 9.1% in a single month. Core rose to 2.6% from 2.4%. The 10-year spiked to 5.33% on the release, then fell for two days as a sell-off in technology shares sent money into bonds. It closed the week 15 basis points lower at 5.09%, and the 30-year fell 17 to 5.43%.
This week's Chart of the Week asks why yields got to 5% in the first place, and the San Francisco Fed's yield decomposition gives an answer with two layers. Getting there was mostly about inflation and the Fed: of the 82 basis point rise in the 10-year zero-coupon yield since 2 January, 70 came from higher expected policy rates and only 12 from term premium. The last push through 5% was different. Between 18 September and 2 October term premium added 21 basis points against 7 from expectations, and that is the part now unwinding. Term premium fell 12 basis points last week, which accounts for almost all of the rally.
That changes two positions. Our 2s10s steepener rested on a front end pinned by a Fed that had finished hiking and a long end carrying a rising term premium. Markets now price a 70.6% chance of a December hike, and term premium has started falling. Both legs of the thesis have weakened, the curve flattened from 44 to 35, and we are closing the trade at 1 basis point below entry rather than waiting for the stop. We are also refining the long-end re-entry condition. The 30-year at 5.43% has met our price test, but a falling term premium is not the signal that matters. The signal is the expected-rate component turning down, which means the market pricing out December.
African credit rallied for a second week, and this time the dispersion meant something. With Brent up 4.9% to $109.86, its highest since May, the oil exporters led. Angola tightened 14.6 basis points against matched Treasuries, Nigeria 13.0 and Ghana 12.9. Egypt widened 9.1, the only credit to lose ground. Its headline average looks like a 26 basis point rally, but one bond maturing within weeks fell 478 basis points on arithmetic. Strip it out and Egypt barely moved while Treasuries rallied up to 17. Both our overweights led the table, and standing aside from Egypt was right.
We owe a correction. Last week's report said Ghana yielded 16 basis points more than Nigeria at nine to ten years and put an upgrade of Ghana on watch. The numbers said the reverse: on 9 October Nigeria's 9.26-year yielded 8.21% and Ghana's 10.23-year 8.05%, so Nigeria was the cheaper bond by 16 basis points. Nigeria has been the cheaper bond, or within a basis point of level, at every reading since early August, which has supported our preference all along. We are withdrawing the Ghana watch. The position was never wrong, but the published reasoning was, and you should know that.
Senegal's December timetable is already slipping. Bloomberg reported on 13 October that the IMF board is unlikely to approve the programme before year-end, because an international audit of the misreported liabilities is still outstanding. Senegal was the second-weakest credit of the week at 3.2 basis points tighter. Last week we wrote that slippage against December would be an observable signal. It has arrived, and we are holding the quarter position rather than adding.
