Fixed Income Update
Economic data this week carried a modest stagflationary tone, with growth coming in softer than expected while inflation remained firm.
Fourth-quarter GDP was reported at 1.4%, below the 2.8% consensus estimate and down from a 4.4% pace in the third quarter. For the full year, the economy grew 2.2%, marking the slowest annual pace since 2020. On the surface, that represents a meaningful downshift in activity. However, the federal government shutdown likely weighed on the data, with some estimates suggesting it subtracted roughly a full percentage point from quarterly growth. As revisions are released in the coming months, we should get a clearer sense of how much of the slowdown was temporary versus more fundamental.
Inflation data was less ambiguous. Core PCE - the Fed’s preferred measure - rose 2.7% in the fourth quarter, slightly above expectations. On a year-over-year basis, headline PCE came in at 2.9% and core at 3.0%, both running comfortably above the Fed’s 2% target. The broader takeaway is that disinflation progress appears to have stalled, and inflation remains sticky enough to limit the Fed’s flexibility.
The bond market responded by pushing rate cut expectations further into the year. While growth is moderating, inflation does not yet give policymakers a clear path to easing. At this point, markets are pricing any potential cuts no earlier than the third quarter.
Yields also faced pressure from policy developments. The Supreme Court struck down President Trump’s global tariff program, ruling the administration exceeded its authority in imposing reciprocal tariffs. Tariff revenue had modestly slowed the pace of Treasury borrowing in recent months. Without that revenue, deficits are likely to widen somewhat, implying increased Treasury issuance over time, a dynamic that tends to weigh more heavily on longer-dated maturities.
Looking ahead, supply will be an important factor. The Treasury is set to issue $183 billion in coupon securities across the 2-, 5-, and 7-year sectors next week, alongside roughly $50 billion in expected investment-grade corporate issuance. The upcoming heavy calendar contributed to upward pressure on yields this week and will remain a key technical consideration in the near term.
As of February 20, 2026
|
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
|
Tax-exempt MMF |
2.42% |
2.37% |
.05% |
3.09% |
-.67% |
|
Taxable MMF |
3.69% |
3.67% |
.02% |
4.34% |
-.65% |
|
|
|
|
|
|
|
|
2-Year Treasury |
3.48% |
3.41% |
.07% |
4.27% |
-.79% |
|
5-Year Treasury |
3.65% |
3.61% |
.05% |
4.35% |
-.69% |
|
10-Year Treasury |
4.09% |
4.05% |
.04% |
4.51% |
-.42% |
|
30-Year Treasury |
4.73% |
4.70% |
.04% |
4.75% |
-.02% |
|
5-Year Exp. Inflation |
2.46% |
2.44% |
.01% |
2.70% |
-.25% |
|
|
|
|
|
|
|
|
2-Year Corporate* |
3.78% |
3.75% |
.03% |
4.51% |
-.73% |
|
5-Year Corporate* |
4.16% |
4.14% |
.03% |
4.84% |
-.68% |
|
10-Year Corporate* |
4.81% |
4.80% |
.01% |
5.26% |
-.45% |
|
30-Year Corporate* |
5.56% |
5.55% |
.00% |
5.68% |
-.12% |
|
|
|
|
|
|
|
|
2-Year Municipal** |
2.16% |
2.18% |
-.02% |
2.73% |
-.56% |
|
5-Year Municipal** |
2.24% |
2.26% |
-.02% |
2.82% |
-.58% |
|
10-Year Municipal** |
2.65% |
2.68% |
-.03% |
3.08% |
-.43% |
|
30-Year Municipal** |
4.37% |
4.46% |
-.10% |
4.25% |
.12% |
|
|
|
|
|
|
|
|
10-Year German Govt Bond |
2.74% |
2.75% |
-.02% |
2.53% |
.21% |
|
10-Year U.K. Govt Bond |
4.35% |
4.41% |
-.06% |
4.61% |
-.25% |
|
10-Year Japanese Govt Bond |
2.10% |
2.21% |
-.10% |
1.43% |
.67% |
|
10-Year Spanish Govt Bond |
3.15% |
3.13% |
.01% |
3.15% |
-.01% |
|
10-Year Italian Govt Bond |
3.34% |
3.36% |
-.02% |
3.61% |
-.28% |
|
|
|
|
|
|
|
|
Fed Funds |
3.75% |
3.75% |
.00% |
4.50% |
-.75% |
|
Prime Rate |
6.75% |
6.75% |
.00% |
7.50% |
-.75% |
|
Dollar*** |
$97.85 |
$96.92 |
$0.93 |
$106.37 |
-$8.52 |
|
CRB |
$309.10 |
$306.54 |
$2.56 |
$316.58 |
-$7.48 |
|
Gold |
$5,061.40 |
$5,022.00 |
$39.40 |
$2,940.00 |
$2,121.40 |
|
Crude Oil |
$66.24 |
$62.89 |
$3.35 |
$72.57 |
-$6.33 |
|
Unleaded Gasoline**** |
$2.00 |
$1.91 |
$0.09 |
$1.96 |
$0.04 |
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
Investors monitored rising geopolitical tensions between the US and Iran this week while also digesting economic data, Federal Open Market Committee (FOMC) meeting minutes, and Friday’s release of the Supreme Court’s ruling regarding the legality of President Trump’s tariffs. The broad market has taken the increase in US–Iran tensions relatively in stride thus far with US stocks trading mixed through Thursday’s market close. The small cap Russell 2000 Index and the Nasdaq Composite were performance leaders, higher by 0.71% and 0.63% through Thursday.
This week’s headlines were in large part focused on growing geopolitical tensions between the US and Iran. Nuclear program talks have thus far failed to show any meaningful progress. A US military buildup in the region has led some to speculate a limited US strike on Iran may be on the horizon to help facilitate nuclear concessions from Iran. Although President Trump is considering military action, diplomatic efforts continue. Given the uptick in geopolitical uncertainty, WTI oil prices traded around $66/barrel as of Friday morning, after trading closer to $62/barrel as of Monday. The S&P 500 Energy sector index was higher by 1.51% on the week through Thursday and more than 23% year-to-date.
The release of the January FOMC meeting minutes provided no major surprises for the market. Most officials continue to see further progress towards the Federal Reserve’s 2% inflation target potentially coming slow; the Fed remains cautious and data dependent. Economic data for the week was mixed. Initial jobless claims of 206,000 came in lighter than the 225,000 estimate and the Philadelphia Fed Manufacturing Index print came in well ahead of consensus. Friday brought softer than expected preliminary GDP data, with the government shutdown a headwind in the fourth quarter; GDP growth was reported at 1.4% vs. consensus of 1.9%. Elsewhere, December PCE, the Fed’s preferred measure of inflation, was a little hotter than consensus with headline PCE rising 2.9% in the month vs. consensus of 2.8%; core PCE was in line with expectations. Per the CME FedWatch Tool, the probability for a June rate cut stood at 53.8% as of Friday morning, down from 59.2% the previous day and 67.5% one week ago.
Artificial intelligence (AI) disruption concerns remained top of mind with investors continuing to weigh which businesses may succumb to AI competitive pressures. Software names continued to struggle with the iShares Expanded Tech-Software Sector ETF (IGV) moving lower by another 1.2% this week through Thursday. Some additional areas pressured by AI disruption fears of late include commercial real estate brokers and data providers. Looking forward, quarterly results/outlooks for these names may be increasingly scrutinized by investors, looking for any signs of AI induced deterioration.
As of Friday morning, US stocks had reversed early session losses after the Supreme Court struck down President Trump’s tariffs. Expectations are for the Trump administration to reapply the tariffs via different avenues. The S&P 500 Index has been relatively range bound year-to-date, predominantly trading between 6825 and 6975. Next week brings a potential near-term market catalyst when Nvidia reports quarterly results on Wednesday the 25th.
As of February 19, 2026
|
Index |
Current Week |
Month of Feb. |
YTD |
|
Dow Jones Industrial Avg. |
-0.18% |
1.14% |
2.96% |
|
S&P 500 |
0.41% |
-1.03% |
0.40% |
|
Nasdaq |
0.63% |
-3.28% |
-2.34% |
|
MSCI EAFE |
0.40% |
2.87% |
8.25% |
|
Russell Mid Cap |
0.44% |
3.01% |
6.16% |
|
Russell 2000 |
0.71% |
2.03% |
7.49% |
