Franklin Templeton’s Sonal Desai: High yields likely to persist in H2 2026 as Fed outlook stays uncertain

According to CNBC, Sonal Desai, chief investment officer at Franklin Templeton Fixed Income, said income investors should continue to see high yields in the second half of 2026 amid uncertainty over potential Federal Reserve policy moves. CNBC reported that the Fed’s minutes from its June meeting, released Wednesday, showed officials held rates steady and signaled possible hikes ahead due to inflation running above target, while rising oil prices helped push the benchmark 10-year Treasury yield to 4.59% on Wednesday. Desai said all-in yields look attractive across high yield and investment grade, and she said she does not expect a sharp rise in default rates without a recession, even as credit spreads remain tight. She also pointed to Franklin Templeton Institute’s mid-year outlook, which said expectations for Fed rate cuts have shifted toward potential hikes and described the yield curve as in a period of “bear flattening.”