Fixed Income Briefing April 2026

Renée Friedman, Global Head of Research

▪ The dollar was down in April, falling over 2%, driven by easing geopolitical tensions and reduced safe- haven inflows. The Federal Reserve held rates steady at its 29 April meeting, acknowledging elevated inflation driven partly by higher global energy prices. It will likely remain on pause as growth proves more resilient than anticipated, but as inflation also stays above target.

▪ US economic data surprised to the upside. The advance Q1 U.S. GDP estimate came in at 2.0%, a notable pickup from the prior quarter’s 0.5%, while the labour market held steady with unemployment at 4.3%. According to ADP, private sector employment increased by 109,000 in April after a revised 61,000 advance in the prior month, and pay was up 4.4% year-over-year.

▪ On the growth front, business activity was up in April, with the S&P Global US Composite PMI coming in at 51.7, up from 50.3 in the previous month. The final S&P Global US Services PMI came in at 51.0 in April, up from 49.8 in March. The Manufacturing PMI was also up, rising to 54.5 from March’s 52.3 and signalled the strongest expansion in the manufacturing economy since May 2022. Gains in production and order books were the steepest seen for four years and drove a strong rise in purchasing. However, this was largely linked to firms building inventories in response to surging raw material prices and supply chain disruptions amid delays and inflationary pressures.

▪ On the consumer side, the April reading of the University of Michigan confidence survey indicated that US consumer sentiment fell again from 53.3 in March to 49.7, a 6.6% drop. Expected business conditions declined for both short and long time horizons. Year-ahead inflation expectations surged from 3.8% in March to 4.7%. Long-run inflation expectations climbed to 3.5% in April, the highest reading since October 2025.

▪ Annualised headline inflation rose to 3.3% in March, significantly up from 2.4% in February, according to the Bureau of Labor Statistics. It was +0.9% on a seasonally adjusted basis m/o/m after rising 0.3% in February. Core annualised CPI was +2.6% y/o/y and 0.2% m/o/m. However, the Fed's favoured inflation measure, the core PCE price index, was +3.2 in March, with monthly core PCE rising 0.3% in March 2026, following a 0.4% increase in February.

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