Last week in bond markets, uncertain geopolitical tensions and inflation fears were the primary forces pushing Canadian and US bond prices lower, sending yields higher; this all unfolded alongside key central bank rate decisions, magnificent seven earnings, and updates from the private credit sector. Higher oil prices continue to impact bond investors as inflation concerns pull yields higher. On the international front, the 30-year UK government bond (GILT) yield hit a 27-year high (near 5.7%), driven by rising government debt levels, global inflation concerns stemming from the war, and political/fiscal uncertainty following a recent government reshuffle. The Bank of England kept rates unchanged, as the Middle East conflict, now in its third month, pushed Brent crude prices to their highest level since 2022 following President Trump's rejection of Iran's proposal to open the Strait of Hormuz.

While both the US Federal Reserve and the Bank of Canada (BoC) kept rates unchanged as expected, investors paid close attention to policy official statements regarding the rising threat of persistent energy inflation. Specifically, BoC Governor Tiff Macklem flagged the risk that "higher energy prices become generalized inflation increases" with a protracted war. However, Macklem also stated there is "little evidence higher oil prices have fed through to other goods and services more broadly" as of yet, noting it is too early to assess. Currently, swap markets predict a rate hike of 0.25% by the Bank of Canada as early as September 2026, with the next rate decision scheduled for June 10th. In the US, Federal Chair Powell conveyed that his leadership transition after his term ends on May 15th is expected to be a standard process. However, he emphasized his intention to remain on the Fed board given the ongoing legal threats against the Federal Reserve, noting that these threats have raised concerns about Fed independence. Currently, investors predict no rate changes from the US Fed for the remainder of 2026. 

Following magnificent seven earnings, Meta’s ambitious capital expenditure plans—driven by higher component pricing and additional data centers—put pressure on its shares. To raise additional funding for infrastructure amidst the AI boom, Meta launched a six-part, US$25 billion investment grade corporate bond deal, ranging from 5 to 40 year maturities. The deal, which included a 30-year bond priced to yield 1.32% above treasuries, with a yield to maturity of 6.27%, was vastly oversubscribed with around US$96 billion in orders according to Bloomberg. A similar offering by Meta in October was priced at a 1.1% premium above treasuries. While the overall demand highlighted investors still have a strong appetite for hyperscaler debt and AI infrastructure initiatives, Meta had to provide even more of a premium yield to investors. The improved premium was likely an attempt to provide a more attractive yield after results that fell below expectations. 

Private asset manager Blue Owl’s earnings saw its share price surge last week after reporting fee-related revenue that exceeded estimates, alongside significant growth in its real assets unit. This provided a degree of confidence for the private credit industry, which has continued to grapple with persistent concerns regarding lending standards, valuation transparency, software loan exposure, and rising fund redemption requests. Blue Owl itself had previously witnessed high redemption requests—reaching 22% for its US$36 billion OCIC fund and 41% for a technology-focused fund (OTIC)—reflecting investor nervousness over AI-disrupted software exposure and the fund's infrequent liquidity/valuation. Despite the skittish environment, Blue Owl executives reiterated that sentiment may be "far grimmer than reality," and they are not seeing any "material negative developments from AI-risk" (Bloomberg).