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.

June 10, 2025

Macro update

The US Court of International Trade ruled against International Emergency Economic Powers Act–based tariffs. The market impact has been muted as the administration appeals the decision and could opt to use other sections of federal law to enforce tariffs.

First-quarter GDP was revised higher to -.2% from -.4%, but underlying details were weaker, supporting rates as the 10-year Treasury declined seven basis points (bps) to 4.44%. Consumption was revised lower from 1.8% annualized to 1.2%, offset by higher inventories.

The data highlight of the week was Friday’s payroll report for May. Nonfarm payrolls increased to 139,000, and the prior two months had downward revisions totaling 95,000. The unemployment rate is unchanged at 4.2%. Wage growth expanded and showed growth in service sectors. There were signs of weakness in industries with tariff exposure.

The report also showed an increase in individuals going from employed status to unemployed, causing concerns regarding how current economic policies could affect employment. This caused September rated cut odds to decrease from 60% to 50%.

May 30, 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 mixed at week’s end. Two-, five-, and 10 -year yields declined three, three, and one bp, respectively, while 30-year yields rose two bps (LSEG MMD, 6/6/2025).

Muni relative value compared with the 10-year Treasury increased slightly to 76% by Friday’s close and remains sharply higher than the two-year average of 66% (LSEG MMD, 5/30/2025).

Five- to 15-year A-rated municipal yields ranged from 3% to 4.29%, with related taxable-equivalent yields ranging from 5.06% to 7.25%, assuming a combined federal tax rate of 40.8% (LSEG MMD, Parametric, 5/30/2025).

Mutual funds experienced a sixth consecutive week of inflows, at $426 million, coming from open-end funds only. Muni ETFS showed modest outflows (-$145 million ) after seven weeks of inflows (LSEG Lipper, JPMorgan 6/6/2025).

Last week’s record $18 billion new issue calendar was digested well in the market, with minimal secondary balances around. This week we expect about $15.6 billion in supply, comforted that the summer reinvestment season is upon us (Bloomberg, JPMorgan 6/6/2025).

Corporate bond update

US investment-grade (IG) corporate yields increased across the curve last week. Two-, five- and 10-year yields rose nine, 11, and eight bps, respectively. Corporate yields are mixed across the curve year to date (YTD). Two- and five-year yields are down 12 bps each, and 10-year yields are unchanged (Bloomberg, 6/6/2025).

The ICE BofA 1–10 Year US Corporate Index returned -0.27% for the week and month to date (MTD). The index outperformed like-duration Treasurys by 0.26% during the week and MTD (Bloomberg, 6/6/2025).

IG mutual funds and ETFs experienced inflows of $4.9 billion, an increase from the previous week’s inflows of $3.8 billion. Corporate-only funds experienced outflows of $1.9 billion, following the previous week’s inflows of $1 billion (JPMorgan, 6/6/2025).

Corporate one- to 10-year IG bond yields have decreased 13 bps YTD and ended last week at 5% (Bloomberg, 6/6/2025).

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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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