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.
August 5, 2025
Macro update
Risk assets dropped Friday, after a disappointing downward revision to payrolls. Rates moved lower, and the yield curve steepened, as investors increased expectations of cuts from the Federal Reserve. Investment-grade credit spreads widened five basis points (bps), while the S&P 500® declined 2.36% last week.
Incorporating downward revisions of 258,000, along with the 73,000 jobs gained last month, the three-month average has decelerated to 35,000 from 127,000 previously, painting a weaker picture of labor market health. Market-implied odds of a September cut jumped above 50% following Friday’s data.
Outside the labor market, Personal Consumption Expenditures (PCE) and GDP figures were in line with consensus expectations last week. The PCE was 1.4%, annualized in the second quarter, while the headline 3% GDP growth was aided by a rebound in net exports form the first quarter. Core PCE stepped up to 0.3% month over month, as expected, following a similar Consumer Price Index reading on higher core goods prices.
Treasury announced that quarterly coupon supply would remain unchanged in its refunding announcement, with the statement signaling that the level would be maintained “for at least the next several quarters.” Bills will comprise the majority of supply to finance the one trillion in Treasury borrowing needs from July through September, as the Treasury General Account is replenished after an increase in the debt ceiling.
August 6, 2025
Fixed income portfolio manager Kevin Lynyak shares his insights on the market impact of the OBBBA. Listen now:
August 1, 2025
Fixed income portfolio manager Kevin Lynyak shares his insights into the current bond market. Listen now:
Municipal bond update
Benchmark AAA municipal yields rallied last week. Two- and five-year yields fell 11 bps each, while 10- and 30-year yields were down nine and 11 bps, respectively (LSEG MMD, 8/4/2025).
Muni relative value compared with the 10-year Treasury was 77% (the three-month average is 76%) and—when compared with the 30-year Treasury—was 96% (the three-month average is 93%) (LSEG MMD, 8/4/2025).
Five- to 15-year A-rated municipal yields ranged from 2.66% to 4.33%, with related taxable-equivalent yields ranging from 4.5% to 7.31%, assuming a combined federal tax rate of 40.8% (LSEG MMD, Parametric, 8/4/2025). These yields look more compelling for bonds in high tax states like California, New York and Minnesota, where taxable equivalent yields range from 5.5% to 9% for top tax payers.
Last week we saw consistent flows into ETFs and open-end funds totaling about $1.4 million (JPMorgan, 8/4/2025).
The municipal primary calendar comes in at $17.3 billion this week, the fourth highest weekly calendar on record. Larger deals of note include New York City general obligation bonds, Triborough Bridge & Tunnel Authority NY Transportation revenue bonds, Colorado Springs Utility revenue bonds, and Port of Seattle transportation bonds.
Corporate bond update
US IG corporate yields were lower across the curve last week. Two-, five- and 10-year yields fell 16, 16 and 13 bps, respectively. Corporate yields are lower across the curve year to date (YTD). Two-, five- and 10-year yields have fallen 45, 54 and 34 bps, respectively (Bloomberg, 8/1/2025).
The ICE BofA 1–10 Year US Corporate Index returned 0.69% for the week and 0.18% in July. The index underperformed like-duration Treasurys by -0.16% for the week but outperformed by 0.48% in July (Bloomberg, 8/1/2025).
The ICE BofA 1–10 Year US Corporate Index returned 0.24% for the week and 0.09% month to date (MTD). The index underperformed like-duration Treasurys by 0.11% for the week and by 0.49% MTD (Bloomberg, 7/25/2025).
IG mutual funds and ETFs experienced inflows of $5.3 billion, an increase from the previous week’s $3.6 billion. Corporate-only funds experienced inflows of $259 million, following the previous week’s outflows of $1.5 billion (JPMorgan, 8/1/2025).
Corporate one- to 10-year IG bond yields have decreased 53 bps YTD and ended last week at 4.6% (Bloomberg, 8/1/2025).
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