Weekly Fixed Income Insights
Track what matters in fixed income: Macro news, policy moves and developments in the municipal and corporate markets.
Fixed Income Five: November Credit and Preferred Outlook
November 6, 2025
Fixed income portfolio manager Kevin Lynyak shares his insights into the current bond market. Listen now:
Fixed Income Five: 3Q Bank Earnings and the Hunt for Cockroaches
October 22, 2025
Fixed income portfolio manager Kevin Lynyak shares his insights into the current bond market. Listen now:
December 16, 2025
Macro update
The Federal Open Markets Committee meeting was the highlight of the week for fixed income, with the Fed lowering the Fed funds rate by 25 basis points (bps), as was widely expected. With three cuts this year and 175 bps of total cuts since the start of policy easing in 2024, the Fed sees the new target range of 3.5% to 3.75% as within a broad range of estimates of “neutral” by the committee (Bloomberg, 12/5/2025).
It appears that the Fed is now in data-dependent mode, interesting because most data will be received during coming weeks, as the government shutdown has altered the typical data release calendar. There were few changes to the dot plot, as there was little new economic information to support material alterations. The median dots suggest one 25-bp cut in 2026 and one in 2027 (Bloomberg, 12/5/2025).
During the press conference, Powell mentioned “tension” between the Fed’s dual mandates of stable prices and full employment. Specifically, employment is at risk of declining, while inflation has risks of rising. Despite the end of quantitative tightening, Powell mentioned that to keep Fed funds within the target range, it will be active in the repo market buying T-bills to “store ample reserves”. The balance sheet will now expand, beginning with $40 billion in the first month or two, then declining in subsequent months (Bloomberg, 12/5/2025).
After rising as high as 4.19% pre-meeting, the post-meeting yield rests at 4.11%, which is basically within the range of the last few weeks (Bloomberg, 12/5/2025).
Municipal bond update
AAA municipal yields were unchanged to mixed across the curve last week, with two- and five-year yields unchanged, while the 10-year dipped one bp and 30-year yields rose three bps. This minimal price action leaves these benchmark yields at 2.43%, 2.43%, 2.76% and 4.24%, respectively (LSEG MMD, 12/11/2025).
Five- to 30-year A-rated municipal yields now range from 2.61% to 4.63%, with related taxable-equivalent yields ranging from 4.41% to 7.82%, assuming a combined federal tax rate of 40.8% (LSEG MMD, Parametric, 12/11/2025).
Muni mutual funds saw net inflows of only $16 million, with open-end funds losing $394 million and ETFs more than offsetting with a gain of $410 million (JPMorgan, 12/10/2025).
Tax-exempts again outperformed Treasurys for the week, with the Bloomberg Municipal Bond Index decreasing four bps, compared with an 18-bp loss for the Bloomberg US Treasury Index, leaving those year-to-date (YTD) total returns at 3.99% and 5.83%, respectively (Bloomberg, 12/11/2025).
The municipal new-issue calendar dwindles to $6 billion following last week’s “impressive for a Fed week” $10 billion. This begins the slowing we’ve discussed recently, and muni performance appears to be responding (Ipreo, 12/5/2025).
Municipal Index Yield to Worst
Sources: LSEG, Parametric, 12/16/2025. 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
US investment-grade (IG) corporate yields were mixed across the curve last week. Two-year yields fell one bp while five- and 10-year yields rose three and five bps, respectively. Corporate yields are lower across the curve YTD. Two-, five- and 10-year yields have fallen 63, 58 and 40 bps, respectively (Bloomberg, 12/12/2025).
The ICE BofA 1–10 Year US Corporate Index returned -0.04% for the week and -0.26% month to date (MTD). The index underperformed like-duration Treasurys by -0.02% for the week but outperformed by 0.13% MTD (Bloomberg, 12/12/2025).
IG mutual funds and ETFs experienced inflows of $2.7 billion, a decrease from the previous week’s inflows of $6.1 billion. Corporate-only funds experienced outflows of $74 million, following the previous week’s inflows of $890 million (JPMorgan, 12/12/2025).
Corporate one- to 10-year IG bond yields have decreased 63 bps YTD and ended last week at 4.5% (Bloomberg, 12/5/2025).
Corporate Index Yield to Worst
Source: Bloomberg as of 12/16/2025. 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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