The Speculative Grade Beat: Rates Take the Wheel

研报英文原文证据摘录

The Speculative Grade Beat: Rates Take the Wheel

The Speculative Grade Beat

25 June 2026 Citi Research

Rates And Macro in the Driver’s Seat

U.S. macroeconomic conditions in 2026 have been defined by persistent

inflationary pressures alongside a resilient labor market, reinforcing the Fed's

cautious policy stance and unchanged Fed Funds rate since the most recent cut in

September. Since the end of February, the Treasuries bear flattened as yields

climbed 40-80bp across the curve.

At last Wednesday's FOMC meeting, the Committee cemented the recent rate shift

with 9 of 18 SEP submissions indicating at least one rate hike later in 2026. The

prior SEP from March pointed to one rate cut so June’s upgraded dot plot now

roughly mirrors the market’s rate expectation. Chair Warsh did not submit personal

projections but generally struck a hawkish tone in his inaugural press conference.

He focused more on committees and initiatives rather than providing additional

forward guidance.

Shortly after the 2:00 PM decision release on Wednesday, Treasuries sold off

sharply, led by the front-end and intermediate "belly" of the curve, as illustrated in

Figure 1. With high yield spreads near post-crisis lows, rates matter more to

leveraged credit today than it has at any point in recent history. Not only has the

spread “cushion” dwindled, but the rate outlook faces two viable paths – higher

rates to stamp out nagging inflation or return to the intermittent rate cuts of the

past two years. Which direction the Fed takes will have significant ramifications for

high yield bonds.

Figure 1. Hawkish Fed and The Rates Selloff

6/17/2026 - Treasury Curve Change

(bps) 2:43pm vs 1:53pm EST

10.0

8.0

6.0

4.0

2.0

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1M 6W 2M 3M 4M 6M 1Y 2Y 3Y 5Y 7Y 10Y 20Y 30Y

-2.0

© 2026 Citigroup Inc.