Global Credit Bullets | Monday, 7 September 2026

The US reportedly added 162,000 jobs last month, well above market expectations, triggering a moderately hawkish repricing of US assets. However, Fed Governor Waller delivered a dovish speech the day before the non-farm payrolls release, suggesting that the bar for a rate hike may be higher than previously thought. The upcoming CPI report will be the final test. Core inflation is expected at 0.2% MoM, and only a significant downside surprise would probably erase the 15bps currently priced for September. As Warsh has repeatedly emphasized, the market needs to price in the move alone and an in-line CPI print could be enough for the Fed to act. With around 23 basis points priced between the September and October meetings, 2y Treasury yields have less room to reprice than they did a few weeks ago.

The yen was once again in the spotlight last week. After a summer marked by interventions and speculation about potential BoJ rate hikes, the currency strengthened significantly, with USDJPY reaching recent lows. The Yen stopped its depreciation supported by speculation that the GPIF may repatriate some of its overseas assets and by expectations that the Bank of Japan could raise rates at the upcoming meeting or at the following one. From here, however, further yen appreciation will likely require the BoJ to surprise the market on the hawkish side. The central bank has historically been reluctant to raise rates, and unless it delivers a more aggressive than expected move, the nearly 100 billion USD spent on interventions over the summer, an amount close to Japan’s annual budget deficit, could ultimately prove ineffective.

Brazil’s presidential race, scheduled for October, is heating up, with Lula and Flávio Bolsonaro reportedly running neck and neck. Lula is seeking a final term, but slowing growth, very high real interest rates, corruption allegations and growing security concerns have weighed on his approval ratings. Recent momentum has shifted in favor of Bolsonaro, supporting the outperformance of Brazilian rates and equities. Against the backdrop of a broader rightward shift across Latin America, Brazil remains the missing piece of the puzzle. A victory for a right leaning candidate could trigger a significant repricing of local assets, particularly rates, given the country’s fiscal challenges and the lack of long term sustainability at current levels. A fourth Lula mandate would likely mean more of the same. Volatility should remain elevated until the possibility of a second round election becomes clearer, with further developments related to the Banco Master case and other corruption allegations likely to emerge. For now, the race remains extremely tight.

Algebris Investments’ Global Credit Team