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.

July 8, 2025

Macro update

US Treasury (UST) yields rose moderately during the holiday-shortened week, with the 10-year UST starting with a yield of 4.23% and closing 12 basis points (bps) higher, at 4.35%.

Two primary factors contributed to the move: Congress passing the President’s budget proposal and the Payroll Situation Report for June.

Passage of the budget bill fulfilled a number of President Trump’s campaign promises and extended tax rates that were set to expire at year end from the Tax Cuts and Jobs Act of 2017. The Congressional Budget Office estimates that the bill will add $2.4 trillion to the deficit.

The June Payroll Situation Report revealed above-expectations headline data and once again tempered market expectations for rate cuts this year. New jobs created handily eclipsed market forecasts of just 106,000 at 147,000 and brought the three-month moving average up to 150,000. The unemployment rate dipped unexpectedly to 4.1%, thwarting expectations of 4.3% and easing from last month’s 4.2%. It appeared to be yet another solid non-farm payrolls report.

This week’s data calendar is rather light and includes mortgage applications, the FOMC meeting minutes from June, initial jobless claims and the federal budget debt summary for June.

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 mildly lower to unchanged last week. Two-, five- and 10-year yields lowered six, seven and five bps, respectively. 30-year yields remained unchanged (LSEG MMD, 7/3/2025).

Muni relative value compared with the 10-year Treasury was 74% by Friday’s close and remains sharply higher than the two-year average of 66% (LSEG MMD, 7/3/2025).

Five- to 15-year A-rated municipal yields ranged from 2.81% to 4.27%, with related taxable-equivalent yields ranging from 4.75% to 7.21%, assuming a combined federal tax rate of 40.8% (LSEG MMD, Parametric, 7/3/2025).

Mutual funds experienced their tenth consecutive week of net inflows, at $959 million. Open-end funds saw the lion’s share, attracting $736 million, with ETFs contributing $223 million. (LSEG Lipper, JPMorgan 7/2/2025).

The upcoming primary market appears to include some pay-back from last week’s holiday-impacted $3 billion calendar, with more than $13 billion scheduled to enter the new-issue market. Next week’s issuance may offer a clue as to whether a summer supply-slowdown is developing (Ipreo, 7/3/25).

Corporate bond update

US investment-grade (IG) corporate yields were mixed across the curve last week. Two- and five-year yields rose five and three bps, respectively, while 10-year yields were unchanged. Corporate yields are lower across the curve year to date (YTD). Two-, five- and 10-year yields have fallen 29, 36 and 22 bps, respectively (Bloomberg, 7/3/2025).

The ICE BofA 1–10 Year US Corporate Index returned 0.04% for the week and 1.32% in June month to date. The index outperformed like-duration Treasurys by 0.34% during the week and 0.29% in June (Bloomberg, 7/3/2025).

IG mutual funds and ETFs experienced inflows of $10 billion, an increase from the previous week’s inflows of $5.3 billion. Corporate-only funds experienced inflows of $2.2 billion, following the previous week’s inflows of $2.3 billion (JPMorgan, 7/3/2025).

Corporate one- to 10-year IG bond yields have decreased 37 bps YTD and ended last week at 4.8% (Bloomberg, 7/3/2025).

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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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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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