Fixed Income Briefing February 2026

Renée Friedman, Global Head of Research

• The dollar weakened and yields steepened in January due to rising geopolitical risks. The US dollar index was -1.20% in January. President Trump’s nomination of Kevin Warsh to replace Fed Chair Jerome Powell when Powell’s term expires in May is still subject to Senate approval. Warsh is a former Fed governor and is well regarded on Wall Street. His nomination eased concerns about President Trump’s relentless pressure campaign on Powell to force the Fed to lower borrowing costs. However, Warsh has called for lower interest rates and a shrinking of the Fed balance sheet. This could push up longer term yields.

• The FOMC January meeting resulted in a widely anticipated rate hold at 3.50-3.75%, with 2 members dissenting. The statement took on a more hawkish tone as it upgraded economic activity to "solid," and said job gains have remained low with the unemployment rate showing signs of stabilisation. Officials dropped language pointing to increased downside risks to employment that had appeared in the three previous statements. The Fed statement noted inflation remains somewhat elevated.

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