Fixed Income Update
U.S. Treasury yields moved higher this week after a volatile stretch that saw rates swing in both directions. The market’s focus shifted between Treasury supply management and Federal Reserve policy signals leaving investors with a clearer sense that policymakers are still trying to balance market functioning against an inflation backdrop that remains too firm for comfort.
The most important development for the bond market came Wednesday, when Treasury Secretary Scott Bessent announced that the Treasury will increase long-term debt buybacks from $2 billion to at least $4 billion per operation. The buyback program, which began in April 2024, is intended to improve Treasury market liquidity by reducing the supply of older, off-the-run securities that often trade at lower prices than current benchmark issues. Bessent described the increase as a way to help stabilize the Treasury market and protect it from upward pressure in global long-term yields as sovereign debt issuance continues to rise. The announcement also sent an important signal to investors: Treasury is willing to act if long-term yields rise in a disorderly way. While the program is not designed to set interest rates directly, the expectation of a more active Treasury presence can create a perceived ceiling for yields, sometimes referred to as a “Treasury put.” Its ultimate effectiveness remains uncertain, and the expanded buybacks are not scheduled to begin until September 9.
The minutes from the Federal Reserve’s July meeting largely reinforced the public messaging that followed the decision to leave rates unchanged. Officials appeared reluctant to move without more evidence, particularly because little new data had arrived between the June and July meetings. Several participants noted that additional tightening could still be necessary if inflation failed to make further progress, but the committee did not appear to have enough new information to justify a policy change at that meeting. The September meeting will be more consequential because policymakers will have two additional CPI, PPI, and PCE reports to evaluate. With that in mind, the July decision looks less like a shift toward easier policy and more like a decision to wait for a fuller inflation picture before reopening the debate over whether rates need to move higher. The minutes also showed that the committee is preparing for a more detailed discussion of the Fed’s balance sheet, with officials awaiting recommendations from a balance sheet task force and setting aside time at future meetings to review next steps. Taken together, the week’s developments suggest that fixed income markets remain caught between two forces: official support for market liquidity on one side and a Federal Reserve that is not yet convinced inflation has slowed enough to declare victory on the other.
As of August 21, 2026
|
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
|
Tax-exempt MMF |
2.39% |
2.02% |
.37% |
2.74% |
-.35% |
|
Taxable MMF |
3.66% |
3.66% |
.00% |
4.28% |
-.62% |
|
|
|
|
|
|
|
|
2-Year Treasury |
4.24% |
4.17% |
.06% |
3.79% |
.44% |
|
5-Year Treasury |
4.42% |
4.37% |
.06% |
3.86% |
.57% |
|
10-Year Treasury |
4.73% |
4.69% |
.04% |
4.33% |
.40% |
|
30-Year Treasury |
5.27% |
5.26% |
.01% |
4.92% |
.36% |
|
5-Year Exp. Inflation |
2.35% |
2.25% |
.09% |
2.47% |
-.12% |
|
|
|
|
|
|
|
|
2-Year Municipal** |
2.63% |
2.58% |
.05% |
2.34% |
.28% |
|
5-Year Municipal** |
2.95% |
2.88% |
.07% |
2.55% |
.40% |
|
10-Year Municipal** |
3.45% |
3.34% |
.11% |
3.47% |
-.02% |
|
30-Year Municipal** |
4.68% |
4.61% |
.07% |
4.94% |
-.26% |
|
|
|
|
|
|
|
|
Fed Funds |
3.75% |
3.75% |
.00% |
4.50% |
-.75% |
|
Prime Rate |
6.75% |
6.75% |
.00% |
7.50% |
-.75% |
|
Dollar*** |
$98.82 |
$99.67 |
-$0.85 |
$98.62 |
$0.20 |
|
CRB |
$403.41 |
$391.41 |
$12.00 |
$298.42 |
$104.99 |
|
Gold |
$4,615.00 |
$4,380.40 |
$234.60 |
$3,336.90 |
$1,278.10 |
|
Crude Oil |
$86.79 |
$82.40 |
$4.39 |
$63.52 |
$23.27 |
|
Unleaded Gasoline**** |
$3.33 |
$3.18 |
$0.15 |
$2.00 |
$1.33 |
* Composite A
** General Obligation AA+
*** Int'l value of the U.S. dollar (Avg. exchange rate between the dollar and 6 major world currencies).
**** Futures price per gallon
Stock Market Update
US equities gave back some recent gains this week as higher US Treasury yields, higher oil prices, and lingering geopolitical uncertainty weighed on risk appetite. The momentum trade was again pressured this week as investors navigated a move higher in long-end US Treasury yields, WTI crude nearing $90/barrel, and fading hopes for a near-term diplomatic resolution to the US-Iran conflict. Major US indices traded lower through Thursday’s close, led by the Nasdaq Composite and Russell 2000, down 2.45% and 2.44%, respectively. The S&P 500, which reached a fresh all-time high last week, driven by strong earnings momentum, also pulled back as bond yields reasserted themselves as a valuation consideration.
The backup in long-dated Treasury yields remained a central focus for equity investors. Increased Treasury and corporate issuance, fiscal concerns, higher energy prices, and persistent inflation worries helped push the 10-year US Treasury yield to its highest level since January of 2025, while the 30-year US Treasury yield reached its highest level since 2007. Higher long-end yields matter for both companies and consumers, as they lift corporate borrowing costs, pressure equity valuations, and flow through to higher lending rates. Although the Treasury Department announced increased debt repurchases focused on longer-dated bonds, the move ultimately did little to ease market pressure. Growth style equities were hit hardest, with the S&P 500 Growth Index down 2.60% through Thursday.
Geopolitical uncertainty added to investor caution. Hopes for a near-term US-Iran peace agreement faded after the ceasefire expired Monday with no deal reached and no talks reportedly scheduled. While military activity has not materially escalated recently, the US appears prepared to increase economic pressure. President Trump threatened economic warfare at an unprecedented level; new measures against Iran will reportedly be unveiled on Monday. Investors are concerned that economic sanctions could spill into the global economy, impact energy supply, and/or complicate US-China relations. Against that backdrop, oil prices pushed higher, with WTI crude trading above $87/barrel Friday morning.
Sector performance reflected the week’s macro drivers. Energy stocks led, with the S&P 500 Energy Sector Index up more than 3% through Thursday’s close as crude prices rose. Precious metals were another notable bright spot in the week as the debasement trade appeared to gain momentum. Gold approached $4,700/ounce late in the week after opening in the $4,400/ounce range. Conversely, sectors tied to the AI infrastructure and momentum trades came under pressure. Information Technology and Industrials both fell more than 3% through Thursday as investors appeared to reduce some exposures.
Retail earnings were broadly underwhelming, but investor attention is already focused on next week’s Nvidia results. The report and forward outlook could be pivotal for sentiment around the AI trade. Federal Reserve Chair Kevin Warsh is also scheduled to speak next week at the Jackson Hole Economic Policy Symposium. While investors expect little in the way of incremental policy guidance, Warsh’s overall tone and commentary are likely to be closely scrutinized. For now, solid fundamentals remain supportive, but higher yields, oil prices, and geopolitical risk could continue to influence positioning.
As of August 20, 2026
|
Index |
Current Week |
Month of Aug. |
YTD |
|
Dow Jones Industrial Avg. |
-1.78% |
0.59% |
10.82% |
|
S&P 500 |
-1.82% |
2.10% |
12.45% |
|
Nasdaq |
-2.45% |
2.78% |
12.57% |
|
MSCI EAFE |
-0.93% |
1.90% |
14.13% |
|
Russell Mid Cap |
-1.92% |
2.73% |
17.71% |
|
Russell 2000 |
-2.44% |
2.17% |
21.44% |
