Fixed Income Update
Bond yields moved higher on Friday following stronger-than-expected March payrolls data, though the reaction was more muted than one might typically expect. More broadly, bond markets firmed over the course of the week and appear likely to remain supported as investors continue to debate whether the war with Iran ultimately poses a greater risk to growth or inflation.
The jobs report itself surprised to the upside, with 178k jobs added in March versus expectations closer to 65k. Even so, the market largely looked through the strength. Hiring decisions reflected in the report were likely made in February, before the escalation in Iran. If growth is beginning to slow, or if it slows as a result of the conflict, that impact will take time to show up in the data. For now, the market remains in a wait-and-see mode, a stance that closely mirrors recent messaging from the Fed and has helped keep a lid on yields.
Fed commentary this week reinforced that cautious tone. On Tuesday, Jay Powell noted that it is appropriate for the Fed to look through an oil-driven shock, but only to a point, without defining where that line sits. Market pricing has shifted meaningfully in response. The probability of a rate hike this year, which started the week around 25%, has now fallen to effectively zero. New York Fed President John Williams said he expects the war to push inflation higher in the near term but still sees it easing back toward 2.75% by year-end. If that path holds, rate cuts would remain on the table. At the same time, Dallas Fed President Lorie Logan acknowledged that the conflict is increasing risks to both sides of the Fed’s dual mandate, a backdrop that typically leads to a more patient, hold-in-place policy stance.
There was also significant focus on President Trump’s primetime address Wednesday evening. Markets had hoped for more clarity, particularly around a potential timeline for de-escalation. Instead, the message left investors with more questions than answers. While the President suggested the conflict could end soon, he also indicated that military action would intensify over the next week or two. Markets interpreted this as a sign that key risks, including the disruption of the Strait of Hormuz, may persist. The lack of detail did little to ease concerns and further complicated the already fragile balance between growth and inflation expectations.
For now, the market continues to oscillate between these two competing narratives without fully committing to either. When oil prices move lower, bonds rally sharply. When oil moves higher, concerns around inflation and consumer strain quickly resurface. Traditional correlations have weakened, and market signals are increasingly being driven by a single, highly volatile input: crude oil.
As of April 03, 2026
|
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
|
Tax-exempt MMF |
2.37% |
2.37% |
.00% |
2.83% |
-.46% |
|
Taxable MMF |
3.65% |
3.65% |
.00% |
4.32% |
-.67% |
|
|
|
|
|
|
|
|
2-Year Treasury |
3.84% |
3.91% |
-.07% |
3.69% |
.15% |
|
5-Year Treasury |
3.98% |
4.07% |
-.09% |
3.73% |
.25% |
|
10-Year Treasury |
4.34% |
4.43% |
-.09% |
4.03% |
.31% |
|
30-Year Treasury |
4.91% |
4.97% |
-.06% |
4.47% |
.44% |
|
5-Year Exp. Inflation |
2.67% |
2.63% |
.04% |
2.55% |
.12% |
|
|
|
|
|
|
|
|
2-Year Corporate* |
4.16% |
4.31% |
-.15% |
4.19% |
-.04% |
|
5-Year Corporate* |
4.52% |
4.69% |
-.17% |
4.46% |
.05% |
|
10-Year Corporate* |
5.09% |
5.29% |
-.19% |
5.01% |
.09% |
|
30-Year Corporate* |
5.76% |
5.93% |
-.17% |
5.61% |
.15% |
|
|
|
|
|
|
|
|
2-Year Municipal** |
2.44% |
2.56% |
-.11% |
2.67% |
-.22% |
|
5-Year Municipal** |
2.66% |
2.80% |
-.14% |
2.90% |
-.24% |
|
10-Year Municipal** |
3.17% |
3.32% |
-.14% |
3.28% |
-.11% |
|
30-Year Municipal** |
4.52% |
4.68% |
-.16% |
4.37% |
.14% |
|
|
|
|
|
|
|
|
10-Year German Govt Bond |
2.99% |
3.09% |
-.10% |
2.65% |
.34% |
|
10-Year U.K. Govt Bond |
4.83% |
4.97% |
-.14% |
4.52% |
.31% |
|
10-Year Japanese Govt Bond |
2.37% |
2.37% |
.00% |
1.34% |
1.03% |
|
10-Year Spanish Govt Bond |
3.47% |
3.63% |
-.15% |
3.30% |
.17% |
|
10-Year Italian Govt Bond |
3.85% |
4.05% |
-.20% |
3.77% |
.08% |
|
|
|
|
|
|
|
|
Fed Funds |
3.75% |
3.75% |
.00% |
4.50% |
-.75% |
|
Prime Rate |
6.75% |
6.75% |
.00% |
7.50% |
-.75% |
|
Dollar*** |
$100.15 |
$100.15 |
$0.00 |
$102.07 |
-$1.92 |
|
CRB |
$381.02 |
$368.91 |
$12.11 |
$303.55 |
$77.47 |
|
Gold |
$4,651.50 |
$4,492.50 |
$159.00 |
$3,097.00 |
$1,554.50 |
|
Crude Oil |
$111.54 |
$99.64 |
$11.90 |
$66.95 |
$44.59 |
|
Unleaded Gasoline**** |
$3.29 |
$3.19 |
$0.10 |
$2.05 |
$1.24 |
Note: Municipal yields are as of the previous business day.
* Composite A
** General Obligation AA+
*** Int'l value of the U.S. dollar (Avg. exchange rate between the dollar and 6 major world currencies).
**** Futures price per gallon
Stock Market Update
Amid continued market volatility, US equities staged a relief rally, with the S&P 500 Index snapping a five-week losing streak. Growth stocks led gains as US equities rebounded from recent lows, supported by moments of cautious optimism for a de-escalation in the Iran conflict. Also, likely supportive of this week’s gains were a move lower in bond yields, month and quarter end rebalancing, and solid economic data.
Despite another sharp increase in oil prices, major US indices managed to advance higher by ~3-4% this week. Early-week comments from President Trump helped to fuel market hopes that an offramp from the conflict with Iran could be developing. Trump indicated the US and Iran were engaged in serious discussions to end the conflict and had suggested the war could be over in two to three weeks; unconfirmed reports noted Iranian President Pezeshkian was open to ending the conflict. However, those hopes faded late in the week as market skepticism of a near-term offramp resurfaced. Trump’s Wednesday evening address lacked clear de-escalation signals and included warnings of a potential escalation in the conflict in the coming weeks. In response, West Texas Intermediate crude surged nearly 12% to $111.54/barrel, underscoring still elevated supply risks and keeping inflation risks top of mind for investors.
Beyond geopolitical developments, lower bond yields helped to support equity performance this week. The US 10-Year Treasury yield retreated from recent highs, easing pressure on growth stocks. Estimates of outsized month and quarter end institutional rebalancing flows likely amplified the relief rally this week. US economic data releases still signaled economic resilience as manufacturing and retail sales data came in better than expected. Friday’s Nonfarm Payrolls print showed jobs gains of 178k, well above consensus. Given the holiday-shortened week, the market will not be able to respond to the Friday jobs report until Monday; the report is likely to support the Federal Reserve’s (Fed) patient stance, even as forward-looking growth and inflation risks continue to linger.
Entering 2026, expectations for additional Fed rate cuts were expected to be a key equity tailwind, but that narrative has weakened of late. Over the past month, market probabilities began to point to no rate cuts in 2026 amid the uncertain inflationary backdrop. According to the CME FedWatch Tool, the market now assigns an 80.6% probability that the Fed will remain on hold throughout 2026, up from 9.9% one month ago. In contrast, earnings growth expectations remain a potential tailwind for US equities. FactSet projects S&P 500 y/y earnings growth of 13.2% for the first quarter (Q1) and 17.4% for the full-year 2026. Investors will have to compare still solid fundamentals against geopolitical, inflationary, and economic growth uncertainties.
As of April 02, 2026
|
Index |
Current Week |
Month of Apr. |
YTD |
|
Dow Jones Industrial Avg. |
2.98% |
0.37% |
-2.83% |
|
S&P 500 |
3.38% |
0.84% |
-3.53% |
|
Nasdaq |
4.46% |
1.35% |
-5.71% |
|
MSCI EAFE |
2.85% |
2.65% |
1.50% |
|
Russell Mid Cap |
3.00% |
1.11% |
2.42% |
|
Russell 2000 |
3.34% |
1.36% |
2.26% |
