Fixed Income Weekly Commentary

Stronger-than-expected May jobs data led to a selloff in U.S. Treasuries, causing markets to price in a Fed rate hike by December. Fixed income sectors generally posted negative returns, with the notable exception of tax-exempt municipals.

Key Takeaways

• 1.A strong nonfarm payrolls report triggered a sharp selloff in Treasuries, pushing the 10-year yield back above 4.50%.
• 2.Markets have shifted to fully pricing in a Fed rate hike by December, driven by sticky inflation and a resilient labor market.
• 3.Credit spreads have remained resilient despite the broader rate volatility, supported by strong technicals and investor demand.

Table of Contents

• Market recap
• Outlook
• Key takeaways
• WHAT WE'RE WATCHING:
• Weekly fixed income snapshot
• U.S. Treasuries
• Tax-exempt municipals
• Taxable municipals
• Investment grade corporates
• U.S. high yield corporates
• Preferred securities
• Senior loans
• Securitized credit
• Global emerging markets
• U.S. Treasury market yields
• Fixed income characteristics and returns
• Important information on risk