Federated Hermes senior fixed-income portfolio manager Karen Manna said in a
report that the most significant change in the fixed-income market in 1H 2026
was the return of inflation expectations. Historically, geopolitical shocks
drove safe-haven flows into U.S. Treasures and pushed yields lower. After the
Iran conflict erupted, however, inflation concerns dominated and pushed yields
higher — especially at the short end of the curve. Market pricing shifted
materially: markets stopped pricing more than two rate cuts and began discussing
the possibility of one or even two rate hikes.
