Rising Rates, Trade Tensions and a Busy Week Ahead for Markets
January 20, 2026
.jpg "iStock-486169251_Traders (1).jpg")
U.S. Treasuries are climbing sharply this morning, following higher global rates from Friday and yesterday.1 The move is being driven in part by rising Japanese Government Bond (JGB) yields amid fears around a snap election and its impact on Japan’s fiscal policy. Additionally, recent developments involving Greenland have intensified trade discussions between the U.S. and Europe, raising concerns about a repeat of the tariff turmoil seen around Liberation Day. At the same time, rising rates are being partly driven by declining odds of Kevin Hasset becoming the next Federal Reserve (Fed) Chair. There was notable movement in Treasury rates on Friday as the 10-year yield surpassed the 4.20% threshold, a level not seen since September.2 This morning, the 10-year continues to move higher, now approaching 4.30%.3 Last week, the corporate investment-grade market priced $60 billion across 23 deals, including Goldman Sachs Group Inc.’s (Goldman) six-part $16 billion bond deal.4 The Goldman bond deal was the largest bank deal in history, yet corporate spreads continued to grind tighter.5 Investors, including those positioning further out along the yield curve, remain a key source of support for spreads.
U.S. markets were closed yesterday in recognition of Martin Luther King Jr. Day, while European and Asian markets remained open and were weaker.6 The rotation into small-cap stocks continued last week with the Russell 2000 Index up 2.04%,7 outperforming the S&P 500 Index return of -0.38%.8 Equities are opening softer around the globe this morning,9 reflecting the weakness seen yesterday outside the U.S.
This holiday-shortened week could bring the much-anticipated Supreme Court ruling on tariffs, while a separate hearing for Lisa Cook scheduled for Wednesday has the potential to sway markets.10 Meanwhile, the World Economic Forum Annual Meeting in Davos will be underway all week, and we’ll be watching for any notable headlines.11 Markets are also awaiting President Trump’s housing-policy announcement. The key economic data release this week will be Thursday’s core Personal Consumption Expenditures (PCE) inflation report for October and November.12 We will be watching for the continued downward trend in inflation, at least in line with current expectations. Corporate earnings and activity in the primary market will continue throughout the week, and we’ll also be monitoring ongoing Greenland-related trade developments, which have been adding to market volatility.
Sources:
1-3,7,8,12Bloomberg
4,5Goldman Sachs
6,9Morningstar – Global Stocks Fall as Trump Escalates Tariff Threats Against Europe; 1/20/26
10Morningstar – Jerome Powell will attend Supreme Court hearing on Lisa Cook's firing; 1/19/26
11World Economic Forum – World Economic Forum Annual Meeting
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.
