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.

December 10, 2024

Macro update

Last week was a data-heavy one for the markets. The spotlight data point was the Payroll Situation Report from November. Headline nonfarm payrolls added 227,000 jobs, which was slightly higher than the 220,000-job gain expected (Bloomberg, 12/9/2024).

Within that jobs release, the unemployment rate increased slightly, from 4.1% to 4.2%. Average hourly earnings also eclipsed expectations, at 0.4% month-over-month (MoM), compared to a consensus forecast for 0.3% (Bloomberg, 12/9/2024).

This is a big week for economic data, with Consumer Price Index (CPI) and Producer Price Index (PPI) results scheduled for release on December 11 and 12, respectively. Core MoM CPI readings are expected to be +0.3%, while Core PPI MoM is expected to be 0.2% (Bloomberg, 12/9/2024).

November 19, 2024

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

Municipal bond update

Benchmark AAA municipal yields declined moderately across the curve last week, with two- and five-year maturities each lower by seven basis points (bps) and the 10- and 30-year maturities each lower by five bps. AAA-rated benchmark tax-exempt yields now stand between 15 and 45 bps higher than at the start of the year (Refinitiv MMD, 12/6/2024).

The Bloomberg Municipal Bond Index increased 0.33% last week, slightly lagging Treasuries and bringing year-to-date (YTD) performance to 2.88%. The Bloomberg US Treasury Index gained 0.39%, taking YTD performance to 2.54% (Bloomberg, 12/6/2024).

Muni relative value remains at fair value. The 10-year benchmark muni yield compared with the 10-year Treasury yield stands at 66%, which is two ratios higher than the YTD average (Refinitiv MMD, 12/6/2024).

Five-, 10- and 15-year A-rated municipal yields were 2.74%, 3.08% and 3.36%, respectively, as of Friday’s close. Related taxable-equivalent yields are 4.63%, 5.2% and 5.68%, respectively, assuming the highest combined federal tax rate of 40.8% (Refinitiv MMD, Parametric, 12/6/2024).

Mutual fund flows have been positive for 23 consecutive weeks, with a $1.2 billion increase last week. Open-end inflows were $900 million and ETFs contributed $300 million (JPMorgan, 11/27/2024).

Corporate bond update

US investment-grade (IG) corporate yields fell across the curve last week. Two-, five- and 10-year yields decreased six, four and four bps, respectively. Corporate yields are lower across the curve YTD. Two-, five- and 10-year yields were down 45 bps, one bp and one bp, respectively (Bloomberg, 12/6/2024).

The ICE BofA 1–10 Year US Corporate Index returned 0.38% for the week and month to date (MTD). The index outperformed like-duration Treasuries by 0.08% during the week and MTD (Bloomberg, 12/6/2024).

IG mutual funds and ETFs experienced inflows of $3.8 billion, a decrease from the previous week’s inflows of $5.3 billion. Corporate-only funds experienced inflows of $679 million, following the previous week’s inflows of $1.5 billion (JPMorgan, 12/6/2024).

Corporate one- to 10-year IG bond yields have fallen 23 bps YTD and ended last week at 4.8% (Bloomberg, 12/6/2024).

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Corporate Bond Market Insight

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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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