Last week, a global bond selloff drove yields higher across the curve, primarily catalyzed by surging oil prices amidst escalating US-Iran hostilities. Bond prices declined on a backdrop of  geopolitical instability, lingering trade tensions and fiscal policy concerns—lifting both short- and long-end yields. For further insights into the drivers, risks and opportunities surrounding rising long-term yields, see last week’s chart on global 30-year bond yields. In other news, central bank rate decisions navigated inflationary risks driven by global supply shocks while managing uncertainty around economic growth. Lastly, in private credit markets, two major fund managers capped quarterly withdrawals. 

The Bank of Canada (BoC) held its policy rate at 2.25%, for a seventh consecutive meeting, as widely expected. While Governor Tiff Macklem noted that second-quarter GDP growth of 3.3% puts the domestic economy on "stronger footing," the Governing Council also cautioned that monetary policy cannot offset the effects of tariffs or influence global energy prices. The commentary further flagged that new US tariffs and Canadian counter-tariffs will raise costs for some businesses and could feed into consumer prices over time.

In response, swap markets repriced higher odds of a 25-basis-point hike by December, reaching nearly 50%, from 32%, following what many investors interpreted as a hawkish tone. ATB Economic team forecasts predicted that the BoC will be on hold for the remainder of 2026, maintaining a ‘wait and see’ posture while tracking fluid geopolitical and trade developments. The two-year Canadian treasury yield, sensitive to monetary policy decisions, climbed 10 basis points higher to close the week off at 3.10%. Separately, The Reserve Bank of New Zealand  delivered an expected 25-basis-point rate hike, signaling that while further tightening remains likely, officials will take time to assess the lagged effects of back-to-back second-half rate increases.

Against a backdrop of private credit concerns regarding lending standards, valuation transparency, and quarterly redemption pressures, Blackstone and Cliffwater capped third-quarter redemptions at 5% for their flagship credit funds, following investor withdrawal requests of approximately 10% and 16%, respectively. These redemption caps generally function to protect long-term strategies, allowing fund managers to maintain investment objectives without resorting to forced asset sales during volatile periods. Additionally, while private funds often offer an illiquidity premium through higher potential returns, investors must balance this against the inherent realities of these assets, particularly limited redemption windows and possible challenges accessing capital in a timely manner. 

In August 2026, the S&P 500 index increased 2.6% and was fuelled by robust second-quarter earnings and strong performances across key industries, including biotechnology (notably Moderna) and energy and enterprise software companies. Despite the index’s positive overall performance, fund flows across ETFs passively tracking the S&P 500 were notably mixed.

The Vanguard S&P 500 ETF (VOO) led monthly inflows, while the iShares Core S&P 500 ETF (IVV) and State Street SPDR ETF (SPY) experienced outflows. This divergence likely reflected tactical reallocations by institutional investors, with SPY outflows further influenced by speculative positions given its much more active options positions. 

Outside of the S&P 500, Invesco’s QQQ Trust ETF (QQQ)—which tracks the tech-heavy Nasdaq-100—captured inflows, signalling possible investor preferences for broad mega-cap exposure primarily concentrated across consumer tech leaders, semiconductors, software and communication services companies. Conversely, the iShares Semiconductor ETF (SOXX) experienced outflows, suggesting some investors may be profit-taking following SOXX’s approximate 60% year-to-date run, or rotating capital away from pure-play semiconductor bets.

In fixed income, the iShares 0-3 Month Treasury Bond ETF (SGOV) saw interest, underscoring demand for short-duration Treasury Bills, commonly utilized as a liquidity and cash management tool. The longer-duration iShares 20+ Year Treasury Bond ETF (TLT) also recorded inflows, as investors made portfolio duration adjustments and paid closer attention to longer-term yields.