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A quarter to remember | UBS Trending Extra · UBS Trending

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  The third quarter of 2026 will be a quarter to remember.
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  At the end of June, 10-year yields
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  hovered around a 4.37%,
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  only to find themselves near a 5.35% by the end of September.
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  This 100 basis point rise came in a very short period of time,
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  both at 10 and 30-year.
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  Treasury yields are at levels that we haven't seen since 2002.
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  While most of the movement
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  has to do with the recalibration of growth, consumer spending
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  and the fact that, you know,
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  GDP is expected to be strong again in the third quarter,
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  it still has put a weigh on interest rates.
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  With the Fed projected to increase
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  the Fed funds rate by about 75 to 100
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  basis points over the next year.
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  We find this view a little bit hawkish
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  while we continue to think growth will remain above trend,
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  and we look for inflation to start to decline in 2027.
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  We feel the Fed
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  is giving the market's pricing in a bit of a hawkish view.
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  Given that outlook we're taking a look at opportunities
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  within the fixed income sector,
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  particularly that of spread product.
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  For most of the year,
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  our allocation has remained in the short end of the yield curve.
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  We wanted to compound that income in the short end
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  without taking on too much interest rate risk.
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  As time has gone on and interest rates have risen.
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  We started to move a little bit
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  out of the curve to that 5 to 7 year area of the curve,
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  particularly when it comes to fixed income spread product.
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  What yields it deals that individuals are earning today
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  and the ability
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  to compound that income
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  or yields that we haven't seen in several decades.
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  The benefit to earning fixed income right
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  now, particularly given the fact
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  the market is pricing in such exuberance in regard to growth.
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  The market's pricing in the expectation that that 2%
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  2% target won't come for at least another year and a half
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  has fixed income looking really attractive for once
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  and for a very long time. I should say.
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  We have the ability
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  to have price appreciation
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  as we expect yields to come down over the next six months.
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  Also, combined with that compounding income of locking in deals
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  while we still staying with the higher quality, as of now,
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  we are starting to see a wider opportunity
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  set within fixed income.
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  So within your portfolio, within your fixed income portfolio,
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  we still prefer the short end in terms of US treasuries
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  and our spread products such as agency MBS.
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  Investment grade corporates
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  are in that intermediate part of the curve.
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  Well, we can't guarantee that.
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  We've seen the high end rates.
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  The magnitude of the move
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  that we've seen during the third quarter will go
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  is will be one to remember.
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  And our expectation again is that the Fed hikes in December,
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  but then stays fairly quiet for some months, only to cut in 2027.
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  This gives fixed income investors
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  the opportunity to lock in today and compound that income.