A Record-Setting Week
March 16, 2026
Last week, capital markets declined as rising tensions in the Middle East pushed energy prices and short-term inflation expectations higher. Treasury yields rose across the curve,1 with front-end rates particularly sensitive to the prospect that elevated energy costs could delay Federal Reserve (Fed) easing, even as growth indicators softened. The 2-year yield increased by 16 basis points (bps) and the 10-year yield rose by 14 bps to 4.28%,2 near the highest levels year-to-date.
February’s Consumer Price Index (CPI) report reinforced stable but still-above-target inflation,3 however, it is viewed as backward-looking given it predated the energy price shock. Credit markets were relatively resilient, with modest spread widening, yet the new-issue market was open for business. Tuesday marked a record day for investment-grade corporate supply, with $65.8 billion in deals priced.4 Corporate issuance for the week was $115 billion, the second-largest weekly volume on record, trailing only the week of April 4, 2020 ($117.9 billion).5 Overall, the week ended with markets pricing fewer Fed cuts in 2026,6 as inflation uncertainty overshadowed weakening labor data.
Attention now turns squarely to the March Federal Open Market Committee (FOMC) meeting, where policy rates are expected to remain unchanged at 3.50%–3.75%,7 but messaging will be critical for markets. Investors will focus on the Fed’s updated economic projections and Chair Powell’s assessment of the trade-off between slowing labor market momentum and renewed inflation risks stemming from higher energy prices. Any indication that policymakers view recent inflation stability as fragile could reinforce the market’s push-out of rate-cut expectations and keep front-end yields elevated.
In addition to the Fed, market participants will monitor announcements from global central banks—such as the Bank of Japan, Bank of England and European Central Bank—as well as U.S. producer price data to assess early signs of inflation. Geopolitical developments remain a key uncertainty for volatility, yield curve shape and inflation risk premium. This week's headlines carry added significance amid mounting tensions in the Middle East, uncertainty surrounding the upcoming Trump-Xi summit and rising inflation and interest rates that are being discounted into markets.
Sources:
1-3,6,7Bloomberg
4,5Truist – Weekly Recap: IG New Issues; 3/13/26
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