Flash Fixed Income: Why markets may be wrong on rate hikes

Looking at the sharp moves in government bond markets in recent days, one would be forgiven for thinking we are seeing some level of forced selling that is pushing valuations lower.

Prediction markets suggest the Democrats are capable of gaining a majority in both the Senate and the House of Representatives at the US midterm elections on November 3, with Polymarket putting the chance of a “sweep” at 64% as of Friday morning.

With two-year UST yields at around 4.7%, we think short end yields are offering an attractive potential hedge against both downside growth catalysts and lower oil prices.

Felipe Villarroel delivered the keynote address at TwentyFour Asset Management’s Annual Fixed Income Conference in London on 17 September 2026.

The topic of banking “deregulation” has come back to the fore this year, mainly fuelled by initiatives from the US authorities.

The importance of “term premium” in discussions about yield curves has been on the rise this year.

The latest FOMC meeting delivered more than a rate hike. Chair Warsh's clear hawkish message that inflation has been too high for too long helped restore confidence in the Fed's commitment to tackling inflation, with important implications for bond markets and rate expectations.

The Rendez-Vous de Septembre (RVS) reinsurance conference was held last week in Monte Carlo. This annual event began in 1957 and is the largest gathering in the reinsurance sector, bringing together participants across the insurance and reinsurance market for bilateral discussions ahead of annual renewals (with a major share of contracts renewing on January 1).

On Thursday, the European Central Bank (ECB) delivered a well telegraphed 25bp rate hike and updated its projections for growth and inflation.