Short-Term Fixed Income

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Short-Term Fixed Income

ontinue to escalate,

pushing Brent crude higher, with prices hovering near $100 per barrel this week. With no

clear path to de-escalation and a relatively light data calendar, all eyes are on next week’s

FOMC meeting. We expect the Fed to leave rates unchanged, though the decision could be

more contested as some Committee members may be growing less patient with above-target

inflation, raising the possibility of at least two hawkish dissents—potentially from Ham-

mack and Logan (see FOMC preview, Michael Feroli, 7/24/26). Since Chair Warsh took

office, Fed communications have maintained a distinctly hawkish tone. Indeed, the recent

shift in our NLP measure of Fed communications ranks in the top 13% of hawkish moves

since 1998 (see US Treasury Market Daily, Jay Barry, 7/22/26). Against this backdrop, mar-

kets have repriced towards a more hawkish policy path since our last publication two weeks

ago: OIS forwards now imply a full hike by the September FOMC meeting and two full hikes

by 1Q27(Figure 1MarketsarenowpricinginafulhikebytheSeptembermetingandtwofulhikesby1Q27).

Meanwhile, funding markets have firmed modestly from the softer levels seen at the start

of the month. Notably, SOFR and TGCR have drifted higher from the July 9 lows, rising

11bp to 3.64% and 3.62%, respectively—or IORB minus 1bp and IORB minus 3bp (Figure

2ReporateshavereboundedfromJuly9lows,withSOFRandTGCRnowat1bpand3bpbelowIORB,respectively). This likely reflects two weeks of significant T-bill and coupon settlements, as $158bn

of net T-bill issuance alongside $57bn of coupon settlements had to be absorbed over the

period, alongside MMF outflows of $104bn since July 9 and $68bn MTD—well below pre-