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 15, 2025

Macro update

Reciprocal tariffs received the most attention last week, and the economic calendar was light. Q2 corporate earnings are coming this week.

Bond yields moved higher by five to 15 basis points (bps) on the heels of the strong June payroll situation report and were largely range-bound last week. Credit spreads moved tighter in investment-grade (IG) corporate yields and are approaching pre-April 2 tights. Large IG fund inflows have propelled credit spread tightening. The robust jobs momentum and the lower 4.1% unemployment rate will likely extend the Fed's pause (Bloomberg, 7/11/2025).

The One Big Beautiful Bill Act (OBBBA) continues to be examined by market participants. The Congressional Budget Office (CBO) scored the bill with approximately $3.4 trillion in deficits over ten years. A lot of this was known and more importantly, these models don’t include tariff revenue. The CBO scored 10 years of projected tariff revenue at $2.8 trillion (Bloomberg, 7/11/2025).

The OBBBA also includes a $5 trillion increase in the debt limit. This provided an earlier than usual debt ceiling resolution. It also avoids an imminent X date—the date when the U.S. Treasury is projected to exhaust its cash reserves.

The data calendar picks up considerably this week, with scheduled releases that include the Consumer Price Index, the Producer Price Index, Industrial Production and Capacity Utilization, retail sales, Import & Export Prices Indexes, the Philadelphia Fed Survey, housing starts and building permits and the University of Michigan’s Sentiment Survey (Bloomberg, 7/11/2025).

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 lower to mixed last week. Two-, five- and 10-year yields declined seven, six and one bps, respectively, while 30-year yields increased one bps (LSEG MMD, 7/11/2025).

Muni relative value compared with the 10-year Treasury eased to 73% by Friday’s close and remains sharply higher than the two-year average of 66%. This was the second week of slight muni outperformance versus USTs (LSEG MMD, 7/11/2025).

Five- to 15-year A-rated municipal yields ranged from 2.75% to 4.26%, with related taxable-equivalent yields ranging from 4.65% to 7.20%, assuming a combined federal tax rate of 40.8% (LSEG MMD, Parametric, 7/11/2025).

Mutual funds experienced an eleventh consecutive week of net inflows at $432 million. Open-end funds took in 209 million, while ETFs accepted $223 million (LSEG Lipper, JPMorgan 7/9/2025).

The primary market remains robust, with approximately $12 billion on tap for this week. We continue to watch for clues of a potential summer supply-slowdown, but there are no signs of one developing this week (Ipreo, 7/11/2025).

Corporate bond update

US IG corporate yields were higher across the curve last week. Two-year yields rose two bps while 10-year yields were six bps higher. Corporate yields are lower across the curve year to date (YTD). Two-, five- and 10-year yields have fallen 33, 38 and 31 bps, respectively (Bloomberg, 7/11/2025).

The ICE BofA 1–10 Year US Corporate Index returned 0.02% for the week but is down 0.19% in July. The index underperformed like-duration Treasurys by 0.08% for the week but is 0.21% higher in July (Bloomberg, 7/11/2025).

IG mutual funds and ETFs experienced inflows of $4.9 billion, a decrease from the previous week’s $10 billion. Corporate-only funds experienced inflows of $1 billion, below the four-week average of $1.9 billion (JPMorgan, 7/11/2025).

Corporate one- to 10-year IG bond yields have decreased 31 bps YTD and ended last week at 4.83% (Bloomberg, 7/11/2025).

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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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