Global Credit Bullets | Monday, 28 September 2026

Global fixed-income markets face further downside risk as stronger activity, elevated oil prices, persistent inflation and fiscal concerns pressure long-duration bonds and French sovereign debt.

• Global rates sold off sharply last week after stronger-than-expected PMIs in Europe and the United States and oil prices approaching new highs.
• The long end of the curve weakened aggressively after a sharp flattening in the first two weeks of September, while the latest five-year US Treasury auction tailed by 3 basis points.
• Demand for long-duration bonds remains constrained as competition for duration has increased and governments are more exposed to rising borrowing costs.
• Core PCE inflation is tracking above 3% and CPI inflation remains above target, leaving the Federal Reserve to choose between further restrictive policy and a more modest recalibration.
• France’s OAT–Bund spread exceeded 100 basis points, its highest level since 2012, while the budget deficit is expected to remain above 5% of GDP this year and next year.
• Political uncertainty, including strong polling for Mélenchon and Marine Le Pen’s prospects of securing a parliamentary majority, is adding to pressure on French assets.

Takeaway: Investors should remain cautious on duration and French government bonds, as persistent inflation, limited long-end demand and fiscal and political risks could keep global rates and French spreads under pressure in the coming months.