Monthly Market Monitor

August 2026

Macro

The Federal Reserve (Fed) left rates unchanged at 3.50%-3.75% at its July 29 meeting. However, three members dissented, favoring a 25-basis-point (bp) hike. Despite the hawkish dissents, Fed Chair Warsh's comments during the press conference were interpreted as dovish. In response, the yield curve steepened as short-term rates fell and long-term yields moved noticeably higher. The yield on the 30-year U.S. Treasury set a new cycle high, rising above 5.2% for the first time since 2007.

June inflation data trended lower; the Consumer Price Index fell 0.4% month over month and slowed to 3.5% year over year (y/y) from 4.2% in May. Headline Personal Consumption Expenditures inflation also declined to 3.7% y/y from 4.1%. The drop in headline inflation was driven by lower energy prices, while softer core services contributed to lower core measures.

Artificial intelligence (AI) infrastructure spending continues to surge; Amazon.com, Inc., Microsoft Corp., Alphabet Inc., Meta Platforms, Inc. and Oracle Corp. collectively raised or reaffirmed significant capital expenditure (capex) plans. Aggregate hyperscaler capex expectations are now approximately 10% higher than at the end of the first quarter. Both credit and equity markets have increasingly focused on this metric given the trillions of dollars in anticipated spending over the next several years.

Credit

During July, investment grade (IG) corporate bonds posted an excess return of -26 bps. The decline was partially fueled by concerns surrounding the growing scale of debt-fueled, AI-related capital spending.

August is expected to be another active month for IG issuance; syndicate desks forecast approximately $130 billion. If this figure is met, it would be the highest August volume since 2020.

Structured

Renewed escalation of the U.S.-Iran conflict drove energy prices higher once again in July, sparking inflation concerns and rate volatility. This pressured the mortgage-backed securities sector and resulted in excess returns of -44 bps.

Asset-backed securities (ABS) issuance continued at a strong pace, totaling $42 billion during the month. Consumer and equipment ABS have been the primary drivers of this year›s increase in issuance.

Chart of the Month: Hyperscalers Lose the AA-rating Premium

Heavy AI-related corporate bond issuance has pressured hyperscaler credit spreads, even for the highest-quality companies.
The compression has been driven by AA-rated issuers, whose growing share of the IG market has reshaped rating-level spread dynamics. Alphabet, Meta, Amazon and Nvidia Corp. now account for approximately 34% of the Bloomberg AA Corporate Index, up from just 15% three years ago.
The A vs. AA-rated corporate bond spread differential has narrowed to the mid-single digits, well below the 25-bp median differential of the past three years.

As of 7/31/2026. Source: Bloomberg L.P. View accessible version of chart.

Market Data

Yields	YTM %	MTD Change	QTD Change	YTD Change
3-Mo UST	3.76	-0.06	-0.06	0.13
2-Yr UST	4.29	0.12	0.12	0.82
5-Yr UST	4.45	0.22	0.22	0.72
10-Yr UST	4.74	0.27	0.27	0.57
30-Yr UST	5.27	0.32	0.32	0.43

Risk Premia	OAS (bps)	MTD Change	QTD Change	YTD Change
Investment Grade Credit	73	4	4	0
Asset-Backed Securities	42	-2	-2	-10
High Yield	279	9	9	13

As of 7/31/2026. Source: Bloomberg L.P.

Bloomberg Sector/Index Performance (USD)

	Duration (yrs.)	MTD Excess Return (%)	YTD Excess Return (%)	MTD Total Return (%)	YTD Total Return (%)
Sector
Investment Grade Credit	6.38	-0.24	0.41	-1.60	-0.76
Mortgage-Backed Securities	5.59	-0.44	0.01	-1.42	-0.45
Asset-Backed Securities	2.73	0.05	0.52	-0.11	0.95
High Yield	2.90	-0.08	1.38	-0.25	1.71

	Duration (yrs.)	MTD Excess Return (%)	YTD Excess Return (%)	MTD Total Return (%)	YTD Total Return (%)
Index
1-3-Yr Government Credit	1.78	-0.01	0.09	0.14	0.91
Intermediate Government/Credit	3.63	-0.04	0.17	-0.43	-0.02
U.S. Aggregate	5.77	-0.17	0.13	-1.30	-0.69

As of 7/31/2026. Source: Bloomberg L.P.

Accessible Chart: Hyperscalers Lose the AA-rating Premium


Date	US Corporate A-AA Quality Spread Differential (OAS)	Median
7/1/2026	51.52	25
1/2/2026	47.77	25
7/1/2025	45.76	25
1/2/2025	43.99	25
7/1/2024	48.16	25
1/2/2024	49.21	25
7/3/2023	59.27	25
1/3/2023	69.89	25
7/1/2022	89.63	25
1/3/2022	57.58	25
7/30/2021	53.10	25

Important Disclosures

This publication is for informational purposes only. Information contained herein is believed to be accurate, but has not been verified and cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice or a forecast or guarantee of future results. To the extent specific securities are referenced herein, they have been selected on an objective basis to illustrate the views expressed in the commentary. Such references do not include all material information about such securities, including risks, and are not intended to be recommendations to take any action with respect to such securities. The securities identified do not represent all of the securities purchased, sold or recommended and it should not be assumed that any listed securities were or will prove to be profitable. Past performance is no guarantee of future results.

Indices and/or Benchmarks Definitions

PNC Capital Advisors, LLC is a wholly-owned subsidiary of PNC Bank, National Association, which is a Member FDIC, and an indirect subsidiary of The PNC Financial Services Group, Inc. serving institutional clients. PNC Capital Advisors' strategies and the investment risks and advisory fees associated with each strategy can be found within Part 2A of the firm's Form ADV.

PNC Capital Advisors, LLC claims compliance with the Global Investment Performance Standards (GIPS®). A list of composite descriptions for PNC Capital Advisors, LLC and/or a presentation that complies with the GIPS® standards are available upon request.

Investments: Not FDIC Insured. No Bank Guarantee. May Lose Value.
©2026 The PNC Financial Services Group, Inc. All rights reserved.

Back to Insights