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UST yields edged lower on Friday amid resilient labor data and improved consumer sentiment. The 10Y closed at 4.23% (-2bp), 2Y at 3.59% (-1.2bp), 5Y at 3.82% (-2.1bp), and 30Y at 4.83% (-1.1bp); 2s10s spread steady at +63.1bp, 5s30s at +100.2bp. Initial jobless claims printed 200k (week ending Jan 17, vs prior 199k), while Michigan sentiment final rose to 56.4 (5-mth high) with 1Y/5Y+ inflation expecs easing to 4.0%/3.3%; Trump reiterated Powell criticisms. US IG/HY CDS and iTraxx Main/Xover steady; today’s 10Y range 4.20-4.25%, ahead of durable goods (tonight) and $69B 2Y auction (early Tue).

UST yields eased overnight with 10Y down 4bp to 4.251% after peaking above 4.3%; 2s10s curve flattened marginally as 2Y held steady at ~3.59% while 30Y fell 5bp. Moves followed recent Beige Book noting modest growth rebound post-shutdown, with contained inflation but tariff cost pressures emerging; no fresh data prints yesterday. US HY CDS widened ~8bp to 273bp, IG stable.

UST yields rose sharply, with 10s +7bp to 4.24% amid Trump tariff threats on Greenland, sparking risk-off flows. 2s10s curve steepened 2bp, 5s30s unchanged; moves followed recent Beige Book noting modest growth and stable labor, ahead of any fresh data prints. US equities plunged (Dow -870pts/-1.8%, S&P -2.1%, Nasdaq -2.4%), HY spreads +5bp to 265bp, IG CDS +2bp (est.), iTraxx Main/Xover wider by 3-5bp, Asia ex-Japan CDS +4bp. Prior Beige Book highlighted slight-modest growth, contained inflation at moderate pace, labor stable. US IG CDS +2bp, HY +5bp to 265bp, iTraxx Main +3bp, Xover +5bp, Asia ex-Japan CDS +4bp on tariff fears.

UST yields edged higher across the curve amid resilient labor data and tempered Fed cut expectations. The 10Y yield climbed 3bp to 4.17%, while 2Y advanced 5bp to 3.57%; 30Y held steady near 4.80%. IG corporate OAS tightened marginally to 77bp, reflecting robust demand despite heavy issuance, with HY spreads stable. Curve steepened slightly as short-end outperformance reflected market pricing just two 25bp Fed cuts in 2026, pushed to mid-year post strong jobless claims at 198k versus 215k forecast. Equities dipped on bank/tech weakness, boosting haven flows into longer USTs early, but yields rebounded on positive regional manufacturing surveys. Credit sectors advanced, IG returning 0.34% outpacing Treasuries by 9bp on 4x oversubscription; munis saw $1.5B inflows amid declining yields. Outlook favors modest yield upside to 4.4-4.55% on 10Y amid fiscal resilience, tariff revenues narrowing SOFR-Treasury spread to 35bp from 55bp, and muted easing. Portfolio managers should extend duration selectively in 3Y-10Y while monitoring IG/HY for value amid rich valuations but steady economic growth. Risks tilt toward volatility from geopolitics and deficit dynamics, favoring barbell strategies blending credit and Treasuries.

UST curve bull-flattened modestly as short-end yields edged higher amid mixed economic signals, while 10Y held steady near 4.18% before ticking up to 4.186% late session. 2Y yield climbed +5bp to 3.54% from 3.49%, reflecting persistent front-end pressure from Fed policy bets, with 3Y at 3.56% up +3bp. IG corporate spreads tightened to 74bps OAS, supporting 0.34% weekly returns despite record $88B new issuance, outpacing Treasuries by 9bp on robust 4x oversubscription. HY advanced 0.39% with +37bp excess return over duration equivalents, absorbing $9.7B supply via steady inflows. MBS and munis declined in yield with positive flows, though EM debt lagged on outflows. IG YTW at 4.81% offers modest income amid rich valuations in 2nd percentile historically. Outlook favors duration extension if Fed cuts materialize, but hawkish data risks +10-15bp 10Y rally; credit stays resilient barring spread widening >20bp. Heavy 2026 supply projected >$2T tests demand, tilting strategy defensive in IG, opportunistic in HY. Curve steepener trades viable if 2s10s widens beyond 65bp.

UST curve flattened mildly as 2Y yield rose 2bp to 4.25% amid resilient economic data while 10Y held steady at 4.17% post modest overnight gains. IG spreads tightened 3bp to 95bp on sustained demand, with HY OAS narrowing 3bp to 2.76% reflecting low default risk and technical buying. MBS outperformed amid softer JOLTS figures signaling cooling labor market, supporting Fed cut expectations into Q1. EM debt rallied 5bp tighter on USD weakness and $1.5B inflows, extending 2025’s 10.9% YTD return. Curve steepening paused with 2s10s spread at +55bp; short-end pressure from BoJ hike offsets ECB hold. Credit sectors resilient despite thin liquidity, favoring carry trades over duration bets. Outlook tilts constructive for risk assets as spreads near tights limit upside but cushion volatility with yields above averages. Watch upcoming CPI and budget data for curve pivot risks; favor IG/HY over long UST amid sticky inflation. Position for 25bp Fed trim in March, hedging tail risk via payers in swaps.

UST curve steepened mildly, with 2Y yield climbing 1.45bp to 3.47% and 3Y up 0.28bp to 3.525%, while 10Y dipped 2.16bp to 4.147% and 30Y fell 3.17bp to 4.829%. Short-end pressure stemmed from resilient employment data offsetting soft-landing bets, keeping front-end yields elevated amid sticky inflation risks tied to tariffs and fiscal expansion under current policy shifts. Mid-to-long curve softened on global growth optimism and anticipated central bank easing, though curve positioning reflects caution on sustained rate cuts given robust U.S. economic momentum. Market dynamics favored short-duration bonds over long-end exposure, as steepening supports mid-short term relative value plays with better carry-to-risk ratios. Credit spreads tightened selectively in IG financials and high-quality HY, bolstered by stable funding conditions and benign default forecasts, yet non-IG segments eyed volatility from liquidity draws in event-driven trades. MBS and CLOs held steady, with prepayment convexity aiding duration stability amid moderate volatility. Outlook tilts neutral-to-cautious: expect 10Y UST rangebound 4.10-4.30% as Fed funds path hinges on January data prints, with 25bp cuts paced through mid-year if core PCE eases below 2.5%. Positioning leans tactical—extend in 2Y-5Y buckets on dips, layer sub-5% IG credits for yield pickup, hedge curve risk via payers in 2s10s swaps. Risks skew to reflation surprises lifting yields 10-15bp, favoring barbell portfolios blending short Treasuries and selective EM debt for alpha. Volatility regimes persist, prioritizing liquidity buffers and dynamic duration at 4-6 years.

UST yields edged higher amid stable risk sentiment, with 10Y closing at 4.19% after a 2bp rise from 4.17% prior session. 2Y yield ticked up 1bp to 3.48%, while 3Y held near 3.55%, keeping curve steepening intact. IG credit spreads steady at 79bp OAS, near historic tights on robust fundamentals. HY BB OAS tightened 2bp to 1.69%, signaling low default fears despite elevated yields around 8.5%. Dollar corporate issuance surged to $61B, locking in 4.8% high-grade yields pre-geopolitical noise from Venezuela events. EM debt outperformed peers with strong inflows, buoyed by dollar weakness. MBS and munis showed resilience, with light supply aiding modest gains. Trading volumes thinned post-holidays but liquidity held firm. Outlook favors carry trades in IG and select HY amid Fed pause expectations, though fiscal stimulus risks yield upside. Steepener positioning gains traction as front-end lags back-end on policy bets. Credit selection key in tight spreads; favor BB over CCC for risk-reward. Volatility low, but monitor oil and tariffs for spread volatility. Duration risk balanced via swaps; relative value tilts to EM over DM credits. Portfolio hedging via payers prudent if 10Y tests 4.30%

UST curve bull-flattened mildly as 10Y yield eased 3bp to 4.17% amid thin liquidity, while 2Y held steady near 3.47% on resilient short-end demand. IG corp spreads unchanged at 1.01% for BBB, reflecting tight credit conditions and year-end positioning unwind. HY OAS ticked up 2bp to 2.83% on Jan 2, signaling minor risk repricing post-holidays. Curve steepener trades gained traction with 10Y-2Y spread widening to ~0.70%, supported by steady front-end amid Fed pause expectations. MBS underperformed peers with spreads grinding wider by 5bp vs UST, pressured by QT runoff and softer bank buying. EM bonds extended gains on carry appeal, outperforming amid dollar softening. Equities’ choppy open diverted flows to core duration, capping selloff in belly. Oil price drop eased inflation fears, bolstering rate cut odds for H1 2026. Upcoming US jobs data looms large; soft print could extend flattener unwind, targeting 10Y at 4.05%. Position for barbell: overweight 2Y/30Y UST, selective IG duration; fade HY if spreads breach 300bp. Risk-reward favors receivers in swaptions amid policy divergence risks from incoming administration. Volatility pickup likely tests carry trades, but liquidity buffers support grind lower in yields. 

Wishing everyone a Happy New Year 2026. May your trades be smooth, your risk well-managed, and your P&L hit new highs in the year ahead.

Global fixed income delivered solid positive returns in 2025, driven by high starting yields, moderate disinflation and a late-year shift toward easier central bank policy. 10Y UST finished the year a touch lower in yield despite persistent fiscal concerns, as the Fed cut rates by a cumulative75bp in the second half in response to a softer labor market and fading inflation momentum. Curves steepened across major markets as front-end yields followed policy rates lower while term premia and heavy supply kept pressure on the long end. Global credit returned about10.3% in USD terms, with US IG and HY outperforming European peers thanks to higher all-in yields, resilient earnings and still-benign default dynamics despite a gradual uptick in distress. Spreads in IG compressed to well through long-run averages, while HY remained supported by low near-term refinancing walls and strong demand for carry. EM debt generated strong double-digit returns helped by tighter spreads and a weaker dollar, though performance remained highly dispersed across idiosyncratic stories and political risk regimes. Securitized credit saw robust issuance in ABS and CLOs, with CLO remaining a key funding channel for leveraged loans even as arbitrage conditions periodically tightened; structures with stronger documentation and senior tranches outperformed. Agency MBS traded with relatively tight spreads versus sovereigns as volatility moderated, but rich valuations and negative convexity continued to cap beta appeal for more rate-sensitive allocators. Overall, 2025 validated the “income is back” narrative, with coupons rather than large duration rallies doing most of the heavy lifting for total returns.​

Looking into 2026, the macro backdrop points to a carry-dominated but more nuanced environment, with growth cooling, inflation still above target and policy normalization progressing only gradually. The base case is for additional but limited rate cuts from major central banks as weaker labor data and slowing activity offset concerns about sticky services inflation. Yield curves are likely to remain steep, as front-end yields fall with policy while intermediate and long maturities stay anchored by supply, term premium rebuilding and uncertainty around fiscal trajectories. In this setting, intermediate maturities around5-7Y look attractive from a carry-roll-down perspective, especially in high-quality sovereigns and agency sectors. IG credit enters the year with tight spreads and limited room for further compression, so security selection and sector rotation should matter more than beta; preference is generally for higher-quality balance sheets and subordinated financials over lower-rated cyclicals. HY and bank loans still offer compelling carry, but forward returns will increasingly depend on active management of downgrade and default risk as higher-for-longer real yields filter through to fundamentals. EM hard-currency credit retains a constructive medium-term story, but wider dispersion and rising geopolitical and trade tensions argue for a more selective, benchmark-agnostic approach. Securitized markets, particularly senior tranches in CLO and high-quality ABS, may continue to provide attractive spread per unit of duration versus vanilla corporates, while agency MBS can play a larger role if volatility cheapens the basis. Overall, 2026 is set up as a year where carry, curve positioning and idiosyncratic alpha drive outcomes more than big directional rate calls, with a bias toward high-quality income, intermediate duration and disciplined liquidity management in the face of episodic volatility.