- Tariff uncertainty remained at the forefront for investors, as the market attempted to digest a flurry of trade policy-related headlines before a cooler-than-expected CPI raised more questions around the Federal Reserve’s (Fed) next move
- The VIX, a proxy for equity market volatility, reached its highest level since December given the ever-evolving tariff backdrop, but fell after news of a potential ceasefire in Ukraine
- Year-over-year CPI came in better-than-expected at 2.8% versus expectations of 2.9%; while trending lower, the Fed may wait for additional data before making a policy adjustment
- Interest rate volatility remained high this week, with the 10-year rate starting 4.30%, falling to as low as 4.15%, moving higher to 4.33%, and settling in at 4.30%
- Despite numerous tariff-related headlines, primary market activity was robust across investment-grade (IG) and high-yield (HY) corporates, with $35 billion and $4 billion priced, respectively
- Borrowers were forced to pay higher new issue concessions this week given lighter demand
- Spreads widened due to lower growth expectations and heightened uncertainty; IG and HY spreads widened by 9bps and 30bps, respectively, to 94bps and 313bps, the widest levels since September
- Yields also increased, with IG yields rising 11bps to 5.24%, and HY yields increasing 29bps to 7.50%
- Asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS) underperformed Treasuries – with higher quality outperforming lower quality – amid the softer tone
- Munis underperformed Treasuries across the curve as muni/Treasury ratios increased on the week; municipal bond funds saw inflows of $419 billion last week
Treasury Yield Curve
Month-to-Date Excess Returns
