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Weekly Fixed Income Update

Interest rates, inflation, central bank action—all these and more can impact fixed income. Stay on top of the market with our weekly update.

June 18, 2024

Macro update

Last week was a big one for macroeconomic data. We digested Consumer Price Index (CPI) and Producer Price Index (PPI) data from May, as well as comments from the Federal Reserve. May’s CPI was flat (0%) month over month (MoM), better than the 0.1% expected. Core CPI now stands at 3.4% year over year, the lowest it’s been in more than two years (Bloomberg, 6/14/2024). 

PPI data also came in better than expected, with MoM PPI decreasing by -0.2% compared with the 0.10% expected. Chairman Powell and the other Fed governors kept rates unchanged for the seventh consecutive meeting. The adjusted dot plot signals only one cut from the Fed this calendar year (Bloomberg, 6/14/2024). 

Looking ahead, we have a light calendar this week with the market holiday on June 19. We’ll see some retail sales data from May, as well as some housing data (Bloomberg, 6/14/2024).

Fixed Income Five by Kevin Lynyak

What are the fixed income five? These helpful data points shed light on what’s driving the narrative in fixed income investing and where markets might be headed.

Municipal bond update

Benchmark AAA muni yields rallied meaningfully across the curve again last week amid a moderate new-issue supply calendar. Two-, five- and 10-year yields dipped 11, 12 and 13 basis points (bps), respectively, and 30-year yields were 10 bps lower. AAA-rated benchmark tax-exempt yields now stand 27 to 57 bps higher than the start of the year (Refinitiv MMD, 6/14/2024).

The Bloomberg Municipal Bond Index gained 0.68% last week, placing year-to-date (YTD) performance at -0.17%. The Bloomberg US Treasury Index gained 1.31%, bringing YTD performance to -0.14% (Bloomberg, 6/14/2024).

Municipal mutual funds reported inflows of $154 million for the week, with ETF inflows of $259 million more than offsetting open-end outflows of $105 million (JPMorgan, 6/12/2024). 

Five-, 10- and 15-year A-rated municipal yields were 3.03%, 3.13% and 3.46%, respectively, as of the June 14 close. Related taxable-equivalent yields were 5.12%, 5.29% and 5.84%, respectively, assuming the highest combined federal tax rate of 40.8% (Refinitiv MMD, Parametric, 6/14/2024).

Corporate bond update

US investment-grade (IG) corporate yields fell across the curve last week. Two-, five- and 10-year yields fell 17 bps, seven and 17 bps respectively. Corporate yields are higher across the curve YTD, with two-, five- and 10-year yields up 23, 36 and 25 bps, respectively (Bloomberg, 6/14/2024).

The ICE BofA 1–10 Year US Corporate Index returned 0.81% for the week and 1% month to date (MTD). The index underperformed like-duration Treasuries on an excess-return basis by 0.17% for the week and underperformed by 0.23% MTD (Bloomberg, 6/14/2024).

IG mutual funds and ETFs experienced inflows of $2.8 billion, a decrease from last week’s inflows of $6.1 billion. Corporate-only funds experienced inflows of $467 million following last week’s inflows of $2.1 billion (JPMorgan, 6/14/2024).

Corporate one-to-10-year IG bond yields have risen 21 bps YTD and ended last week at 5.3% (Bloomberg, 6/14/2024).

Investing in fixed income securities involves risk. All investments are subject to loss. Learn more.

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The views expressed are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Parametric and its affiliates disclaim any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Parametric are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Parametric strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness. Past performance is no guarantee of future results. All investments are subject to the risk of loss. Prospective investors should consult with a tax or legal advisor before making any investment decision. Please refer to the Disclosure page on our website for important information about investments and risks.