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.

April 29, 2025

Macro update

Headlines from Washington DC continue to roil markets. Recent examples from The Wall Street Journal include “Trump is Laying the Groundwork to Blame Powell for Any Downturn” (4/22), “Why Trump Decided Against Trying to Fire Fed Chair,” “White House Is Considering Slashing China Tariffs” and “Huge Stock Swings Are the New Normal for Frazzled Investors” (4/23).

Meanwhile, US Treasury bond yields moved higher last week by five to 10 basis points (bps) but continue to ebb and flow as news breaks. Equities sold off last Monday on concerns about Fed independence but rebounded after the White House walked back related rhetoric.

Trade concerns remain front and center, as evidenced by the equity market’s rebound on an apparent de-escalation of Chinese tariffs. Uncertainty and volatility remain elevated across markets, as policy changes occur seemingly every day.

Economic data was light last week. Idiosyncratic data continues to suggest weakness we’ve yet to see in the hard economic data. Earnings season has begun, with investors trying to glean information from management teams on how they plan to navigate the prevailing trade uncertainty.

The highlight of this week’s economic data will likely be the payroll situation report scheduled for release on Friday, May 2. The consensus street expectation is for a gain of 134,000 jobs in non-farm payrolls. The unemployment rate is expected to remain unchanged, at 4.2% (Bloomberg, 4/25/2025).

April 25, 2025

Fixed income portfolio manager Kevin Lynyak shares his insights into the current bond market. Listen now:

Municipal bond update

Benchmark AAA municipal yields declined minimally last week amid less volatility than prior weeks. Two-year maturity yields decreased two bps, five-year yields dipped three bps and 10- and 30-year yields were unchanged.

Benchmark tax-exempt yields remain solidly higher since the start of the year, with five- and 10-year maturities up by 25 and 38 bps, respectively. Benchmark 10-year yields remain at 3.44% (Refinitiv MMD, 4/25/2025).

The Bloomberg Municipal Bond Index gained 0.07% last week, cutting the negative year-to-date (YTD) total return to -1.62% YTD. Treasurys had a stronger week and added 0.52%, bringing that YTD total to 2.95% (Bloomberg, 4/25/2025).

Muni relative value compared with the 10-year Treasury remained elevated at 81% by Friday’s close, sharply above the two-year average of 66% (Refinitiv MMD, 4/25/2025).

Five- to 15-year A-rated municipal yields ranged from 3.32% to 4.24%, with related taxable-equivalent yields ranging from 5.61% to 7.16%, assuming a combined federal tax rate of 40.8% (Refinitiv MMD, Parametric, 4/25/2025).

Mutual funds experienced a seventh consecutive week of net outflows, with open-end funds losing $793 million and overwhelming ETF inflows of $396 million (LSEG Lipper, JP Morgan 4/23/2025).

This week’s municipal new-issue calendar brings a second week of more than $12 billion scheduled, which may rise again because of postponed deals re-entering the market. Seasonally-heavy supply has been a primary factor behind March and April muni underperformance, which continues (Ipreo, 4/25/2025).

Corporate bond update

US investment-grade (IG) corporate yields fell across the curve last week. Two-, five- and 10-year yields decreased nine, 10 and 11 bps, respectively. Corporate yields are lower across the curve YTD. Two-, five- and 10- year yields are down 20, 21, and 10 bps, respectively (Bloomberg, 4/25/2025).

The ICE BofA 1–10 Year US Corporate Index returned 0.65% for the week and 0.1% month to date (MTD). The index outperformed like-duration Treasurys by 0.34% during the week and have underperformed by -0.32% MTD (Bloomberg, 4/25/2025).

IG mutual funds and ETFs experienced outflows of $4.1 billion, an increase in flows from the previous week’s outflows of $7.1 billion. Corporate-only funds experienced outflows of $1.9 billion, following the previous week’s outflows of $695 million (JPMorgan, 4/25/2025).

Corporate one- to 10-year IG bond yields have decreased 21 bps YTD and ended last week at 4.9% (Bloomberg, 4/25/2025).

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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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