Fed Rate Hike Fuels Uncertainty Over Future Increases

The US Federal Reserve's September rate increase has changed short-term interest rate expectations, but managers disagree about further moves. Amundi sees a credibility measure that could be followed by another increase, while PIMCO expects one or two further moves through early 2027. Nuveen considers another 2026 increase a closer call than markets suggest.

Goldman Sachs Vice Chairman Rob Kaplan thinks markets may be pricing too much tightening. The divergence matters for bond positioning, with the two-year US Treasury yield rising 12 basis points to 4.75% in the week to 18 September.

Ai-related profits are supporting equities at the same time as the build-out demands more debt, power and materials. BlackRock Investment Institute's commentary argues that heavy sovereign borrowing and accelerating AI investment are intensifying competition for capital.

PIMCO found little statistically significant evidence of a direct channel between hyperscaler bond deals and Treasury yields. Goldman Sachs Research estimates that almost half of S&P 500 earnings-per-share growth in 2026 comes from AI investment.