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 24, 2025

Macro update

Following an uneventful Federal Open Markets Committee (FOMC) meeting last week that was in line with expectations, Treasurys were stronger Monday morning on the dual drivers of a flight to quality from US military activity in Iran and recent comments by two Federal Reserve governors that rate cuts may resume at the July meeting if inflation remains tepid.

At the conclusion of the FOMC meeting, the key fed funds overnight lending rate target was left unchanged at a range between 4.25% and 4.5%. An updated Summary of Economic Projections (the “dot plot”) was also released and showed little change from the prior indications—namely, two 25-basis-point (bps) cuts during this calendar year. Fed funds futures markets are also currently pricing two cuts by year-end.

This week brings a host of economic data releases, including manufacturing and service purchasing managers indexes; existing home sales; the Richmond, Philadelphia, Chicago and Kansas City Fed indexes; consumer confidence, new home sales, first-quarter GDP, durable goods orders, personal income and spending and the Personal Consumption Expenditures price index.

Looking forward, The White House still awaits passage of its budget bill by congress (with a goal of July 4), the 90-day reprieve on reciprocal tariffs expires July 9 and second-quarter earnings reporting commences in July.

June 27, 2025

Fixed income portfolio manager Kevin Lynyak shares his insights into the current bond market. Listen now:

Municipal bond update

Benchmark AAA municipal yields were slightly lower or unchanged last week. Two-year yields dipped by three bps, five- and 10-year yields eased by just two bps, and 30-year yields were unchanged (LSEG MMD, 6/20/2025).

Muni relative value compared with the 10-year Treasury was unchanged at 75% by Friday’s close and remains sharply higher than the two-year average of 66% (LSEG MMD, 6/20/2025).

Five- to 15-year A-rated municipal yields ranged from 2.93% to 4.27%, with related taxable-equivalent yields ranging from 4.95% to 7.21%, assuming a combined federal tax rate of 40.8% (LSEG MMD, Parametric, 6/20/2025).

Mutual funds experienced an eighth consecutive week of net inflows, at $111 million. ETFs carried the week, attracting $508 million, while open-end funds represented a drag, losing $398 million (LSEG Lipper, JPMorgan 6/18/2025).

The primary market had a break and easily digested last week’s light $6 billion new-issue calendar. A robust calendar resumes this week, with more than $11 billion scheduled to enter the muni market in coming days. Part of this week’s calendar could have been held over from last week because of the FOMC meeting. We may need to wait until two weeks after July 4 to determine whether a summer supply-slowdown is developing (Ipreo, JP Morgan 6/20/2025).

Corporate bond update

US investment-grade (IG) corporate yields decreased across the curve last week. Two-, five- and 10-year yields fell five, five and four bps, respectively. Corporate yields are lower across the curve year to date (YTD). Two-, five- and 10-year yields have fallen 22, 27, and 12 bps, respectively (Bloomberg, 6/20/2025).

The ICE BofA 1–10 Year US Corporate Index returned 0.24% for the week and 0.46% month to date (MTD). The index performed in line with like-duration Treasurys during the week and outperformed by 0.21% MTD (Bloomberg, 6/20/2025).

IG mutual funds and ETFs experienced inflows of $2.3 billion, a decrease from the previous week’s inflows of $2.7 billion. Corporate-only funds experienced outflows of $1.5 billion, following the previous week’s outflows of $563 million (JPMorgan, 6/20/2025).

Corporate one- to 10-year IG bond yields have decreased 27 bps YTD and ended last week at 4.9% (Bloomberg, 6/20/2025).

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INSIGHT

Corporate Bond Market Insight

Each month we recap the corporate bond market’s performance, delving into the numbers and offering forward-looking commentary. Click below for the latest edition.

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INSIGHT

Municipal Bond Market Insight

Each month we recap the muni bond market’s performance, delving into the numbers and offering forward-looking commentary. Check out the latest edition.

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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.

An imbalance in supply and demand in the municipal market may result in valuation uncertainties and greater volatility, less liquidity, widening credit spreads, and a lack of price transparency in the market. There generally is limited public information about municipal issuers. As interest rates rise, the value of certain income investments is likely to decline. Longer-term bonds typically are more sensitive to interest-rate changes than shorter-term bonds. Investments in income securities may be affected by changes in the creditworthiness of the issuer and are subject to the risk of nonpayment of principal and interest. The value of income securities also may decline because of real or perceived concerns about the issuer’s ability to make principal and interest payments.

Corporate debt securities are subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may also be subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer, and general market liquidity. When interest rates rise, the value of corporate debt securities can be expected to decline. Debt securities with longer maturities tend to be more sensitive to interest rate movements than those with shorter maturities. Company defaults can impact the level of returns generated by corporate debt securities. An unexpected default can reduce income and the capital value of a corporate debt security. Furthermore, market expectations regarding economic conditions and the likely number of corporate defaults may impact the value of corporate debt securities.

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