Weekly Fixed Income Insights
Track what matters in fixed income: Macro news, policy moves and developments in the municipal and corporate markets.
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Fixed income portfolio manager Kevin Lynyak on U.S. Banks 2Q26 review. Listen now:
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August 12, 2026
Macro update
Lower oil prices and softer payrolls pulled Treasury yields back from their recent highs last week. The 10-year Treasury yield declined approximately 10 basis points (bps) to 4.65%, reversing part of the late-July selloff, as progress toward a diplomatic framework around the Strait of Hormuz pushed Brent crude 7% lower (Bloomberg, 8/7/2026).
Improvement in the macro backdrop fueled a broad risk-on rally. The S&P 500® gained 3.6%, the Nasdaq advanced 5.2% and the Dow Jones Industrial Average rose 3%, with technology leading as lower oil prices, lower yields and another strong week of earnings revived the AI trade (Bloomberg, 8/7/2026).
Payroll reports reduced the urgency for an imminent rate hike by the Federal Reserve. July payrolls unexpectedly declined by 23,000, compared with expectations for an 80,000 gain, while May and June were revised lower by a combined 103,000 jobs. The unemployment rate declined to 4.1%, partly on lower participation, suggesting a softer—but not collapsing—labor market (Bloomberg, 8/7/2026).
Inflation now takes center stage. Wednesday’s Consumer Price Index (CPI) and Thursday’s Producer Price Index reports will determine whether softer labor data is enough to keep the Fed on hold. Core CPI estimates cluster around 0.2% to 0.26% month over month, with lower gasoline prices expected to restrain headline inflation. A meaningful upside surprise could quickly revive the case for a September hike (Bloomberg, 8/7/2026).
There’s been no summer lull in corporate issuance; roughly $80 billion of supply came to market. Despite the calendar, investment-grade (IG) spreads tightened and high-yield tightened sharply, underscoring strong demand and growing investor comfort with AI-related debt supply (Bloomberg, 8/7/2026).
Municipal bond update
AAA municipal yields moved lower across the curve last week. Two- and five-year yields fell 10 and 14 bps, respectively, while 10- and 30-year yields declined 12 and six bps, respectively. This price action left these benchmarks at 2.53%, 2.77%, 3.25% and 4.45%, respectively (LSEG, 8/7/2026).
Five- to 20-year A-rated muni yields closed last week ranging from 2.95% to 4.38%, with related taxable-equivalent yields ranging from 4.98% to 7.4%, assuming a combined federal tax rate of 40.8% (Parametric, LSEG, 8/7/2026).
Muni mutual funds recorded $1.3 billion in inflows as of July 29. ETFs attracted $588 million, while open-end funds garnered $720 million (LSEG, JPMorgan, 8/05/2026).
This week’s calendar eases to its robust trend, with $13 billion scheduled to enter the primary market, which follows and outsized $19 billion last week (Ipreo, 8/07/2026).
Munis outperformed last week and now post a 1.11% year-to-date (YTD) return. The Bloomberg US Treasury Index also gained ground, mitigating its negative YTD return to just -0.37%.
Municipal Index Yield to Worst
Sources: LSEG, Parametric, 8/11/2026. Assuming a top federal tax rate of 37%, plus 3.8% net investment income tax rate, 40.8% combined. For illustrative purposes only. It is not possible to invest directly in an index. Past performance is no guarantee of future results.
Corporate bond update
The ICE BofA 1-10 Year US Corporate Index returned 0.47% for the week and month. The index outperformed like-duration Treasurys by 0.07% for the week and month (Bloomberg, 8/7/2026).
US IG corporate yields were lower across the curve last week. Two-, five-, and 10-year yields fell seven, eight, and eight bps, respectively. Corporate yields are higher YTD, with two-, five- and 10-year yields up 59, 60 and 51 bps, respectively (Bloomberg, 8/7/2026).
IG mutual funds and ETFs experienced inflows of $7.7 billion, an increase from the previous week’s inflows of $3.3 billion. Corporate-only funds experienced outflows of $1 billion, following the previous week’s inflows of $130 million (JPMorgan, 8/7/2026).
Corporate one- to 10-year IG bond yields, which have increased 60 bps YTD, ended last week at 5.1% (Bloomberg, 8/7/2026).
Corporate Index Yield to Worst
Source: Bloomberg as of 8/11/2026. Past performance is no guarantee of future results. The index performance is provided for illustrative purposes only and is not meant to depict the performance of a specific investment.
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