A quarter to remember | UBS Trending Extra Video

The third quarter of 2026 marks a significant shift in the financial landscape, with 10-year Treasury yields rising sharply from 4.37% at the end of June to approximately 5.35% by September. This increase of 100 basis points reflects a recalibration of growth expectations and consumer spending, driven by a robust GDP forecast for the quarter. The Federal Reserve is anticipated to raise the Fed funds rate by 75 to 100 basis points over the next year, indicating a hawkish stance that may impact interest rates further.

Amidst this environment, opportunities within the fixed income sector are becoming increasingly attractive. Investors are encouraged to focus on the short end of the yield curve to mitigate interest rate risk while capitalizing on compounding income. As interest rates have risen, there is a shift towards the five- to seven-year area of the curve, particularly in fixed income spread products. The current yields present a rare chance for price appreciation, with expectations that rates may decline over the next six months.

The outlook suggests that while high rates may not be guaranteed to have peaked, the significant movements seen in the third quarter will have lasting implications. Fixed-income investors are advised to lock in current rates and benefit from compounding income, with a preference for higher quality assets in their portfolios. The expectation is that the Fed will hike rates in December but remain inactive for several months before potentially cutting rates in 2027.

Leslie breaks down why this year was “a quarter to remember”: why Treasury yields hit 2002 highs, what’s driving interest-rate volatility, and where she sees value in fixed income today.

For more content, please visit ubs.com/studios.

#shareubs