Muzinich Weekly Market Comment: The Long End Reprices

September 28, 2026

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US Treasury yields rose sharply last week as strong economic data reinforced expectations that inflation will prove persistent and the Federal Reserve (Fed) will need to raise short-term rates further. The move was concentrated at the long end of the curve, where investors demanded a higher term premium, and the 10-year Treasury yield rose above 5.1%, its highest level since 2007.¹ Markets have brought forward expectations for the next hike from December to October. Fed officials' comments reinforced a 'higher for longer' stance aimed at returning inflation to the 2% target. In our view, the repricing at the long end was the defining theme of the week (see the Chart of the Week).

Oil prices remained volatile but ended the week flat to lower on hopes of an agreement to reopen shipping through the Strait of Hormuz.

September Purchasing Managers' Index (PMI) readings were strong across developed markets. In Europe, the recovery was broad-based. The spike in oil prices in March and April had weighed on activity, particularly in services, but momentum has now returned across the board. Price components, however, reflect the pass-through of higher energy costs. The result is firm activity alongside building price pressure in the pipeline. In Germany, the ifo Business Climate Index confirmed the PMI signal. The government's fiscal spending plan is supporting orders and manufacturing output, providing German companies with greater visibility.

The US picture was similar. Both manufacturing and services PMIs surprised to the upside, and here too price components moved higher for both inputs and outputs. Durable goods orders were also solid, with non-defence orders excluding transportation rising 1.6% month-over-month.

Credit spreads widened only modestly despite the rise in rates, supported by resilient US growth fundamentals. The magnitude of the move in yields is, however, beginning to weigh on spread valuations, as higher yields translate into higher refinancing costs for corporate issuers. Technicals have also softened. Primary supply has been heavy in September following an already busy August, and negative year-to-date performance has prompted moderate outflows.

Third-quarter earnings season begins in approximately two weeks and should refocus investors on corporate fundamentals. Equity strategists seem to largely expect the market to end the year higher.

In the week ahead, the September employment report is expected to show approximately 100,000 jobs added.²   We will also watch whether the Institute for Supply Management (ISM) manufacturing index confirms the PMI signal.

In our view, the front end of the curve has now priced in the anticipated policy rate hikes and may offer compelling opportunities. Volatility at the long end is likely to persist while the geopolitical outlook remains uncertain. Discussions between the US and Iran at the United Nations (UN) General Assembly did not seem to produce visible progress.

Chart of the Week: Weekly change in US Treasury yields across the maturity curve

US 10-year Treasury yield since 2007

Source: Bloomberg, as of September 25, 2026. Muzinich views and opinions are subject to change. For illustrative purposes only, not to be construed as investment advice or an invitation to engage in any investment activity.

Past performance is not a reliable indicator of current or future results.

References to specific companies is for illustrative purposes only and does not reflect the holdings of any specific past or current portfolio or account.

References

1. Bloomberg, as of September 25, 2026
2. Bloomberg, as of September 25, 2026

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of September 25, 2026, and may change without notice. All data figures are from Bloomberg, as of September 25, 2026, unless otherwise stated.

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