Fixed Income Update
The U.S. Treasury market is poised for one of its best weeks since April, buoyed by strong auction results and encouraging inflation data.
After weeks of concern about weak demand for Treasuries amid rising government spending, investors finally found some relief. Fears of a “sell USA” environment have circulated since the April 2nd “Liberation Day” press conference, contributing to unease around the market’s ability to absorb elevated debt issuance. The 30-year Treasury bond, in particular, has been under scrutiny after yields climbed as high as 5.15% in recent weeks, driven by global concerns over unsustainable sovereign debt levels.
On Thursday, the Treasury auctioned $22 billion in 30-year bonds. The results were solid, helping to restore confidence in the market’s capacity to handle ongoing issuance without a significant deterioration in demand.
Inflation data released this week further boosted sentiment. Wednesday’s Consumer Price Index (CPI) report was better than expected, showing the fourth consecutive month of slowing inflation. Headline CPI rose just 0.1% in May, below the 0.2% forecast. Core CPI—which excludes the more volatile food and energy components—also rose 0.1%, well below expectations of a 0.3% increase. Year-over-year, headline inflation rose 2.4%, while core inflation rose 2.8%.
We view this as meaningful progress on the inflation front, though we remain cautious about the potential inflationary impact of tariff-related price increases in the coming months. With the Federal Reserve currently in its pre-meeting blackout period, policymakers offered no official comments on the CPI data. Still, we suspect they, too, will remain measured in their response.
Thursday’s Producer Price Index (PPI) data echoed the benign inflation trend. PPI rose 0.1% in May, following two consecutive monthly declines. The core index also rose 0.1%, both measures coming in softer than expected. Combined with the CPI report, this suggests that inflation is moderating more effectively than many economists had predicted earlier in the year, when fears of re-accelerating price pressures loomed large.
Geopolitical tensions in the Middle East briefly sparked a flight to safety early Friday, pushing Treasury yields lower. However, that move quickly reversed after oil prices jumped more than 7%, refocusing market attention on the potential inflationary consequences of higher energy costs.
Looking ahead, all eyes turn to the Federal Reserve’s policy meeting next Wednesday. A rate cut is off the table, but investors will closely watch the updated Summary of Economic Projections (SEP), which includes policymakers’ forecasts for GDP growth, inflation, and unemployment. The Fed will also release an updated dot plot, which shows each FOMC participant’s individual projection for the appropriate federal funds rate over the next few years.
As of June 13, 2025
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
Tax-exempt MMF |
2.20% |
2.28% |
-.08% |
3.02% |
-.82% |
Taxable MMF |
4.27% |
4.27% |
.00% |
5.33% |
-1.06% |
|
|
|
|
|
|
2-Year Treasury |
3.93% |
4.04% |
-.10% |
4.70% |
-.76% |
5-Year Treasury |
3.99% |
4.12% |
-.13% |
4.25% |
-.25% |
10-Year Treasury |
4.38% |
4.51% |
-.13% |
4.25% |
.14% |
30-Year Treasury |
4.87% |
4.97% |
-.10% |
4.40% |
.47% |
5-Year Exp. Inflation |
2.32% |
2.36% |
-.05% |
2.16% |
.16% |
|
|
|
|
|
|
2-Year Corporate* |
4.28% |
4.40% |
-.11% |
5.04% |
-.76% |
5-Year Corporate* |
4.55% |
4.71% |
-.16% |
4.84% |
-.28% |
10-Year Corporate* |
5.15% |
5.31% |
-.16% |
5.12% |
.03% |
30-Year Corporate* |
5.75% |
5.88% |
-.13% |
5.40% |
.35% |
|
|
|
|
|
|
2-Year Municipal** |
2.72% |
2.83% |
-.11% |
3.14% |
-.42% |
5-Year Municipal** |
2.80% |
2.91% |
-.10% |
2.97% |
-.17% |
10-Year Municipal** |
3.38% |
3.51% |
-.13% |
2.94% |
.44% |
30-Year Municipal** |
4.82% |
4.89% |
-.07% |
3.99% |
.83% |
|
|
|
|
|
|
10-Year German Govt Bond |
2.49% |
2.57% |
-.08% |
2.47% |
.03% |
10-Year U.K. Govt Bond |
4.52% |
4.64% |
-.12% |
4.12% |
.40% |
10-Year Japanese Govt Bond |
1.40% |
1.44% |
-.04% |
.96% |
.44% |
10-Year Spanish Govt Bond |
3.13% |
3.15% |
-.02% |
3.32% |
-.19% |
10-Year Italian Govt Bond |
3.45% |
3.50% |
-.05% |
3.93% |
-.48% |
|
|
|
|
|
|
Fed Funds |
4.50% |
4.50% |
.00% |
5.50% |
-1.00% |
Prime Rate |
7.50% |
7.50% |
.00% |
8.50% |
-1.00% |
Dollar*** |
$98.36 |
$99.19 |
-$0.83 |
$105.20 |
-$6.83 |
CRB |
$302.76 |
$300.89 |
$1.87 |
$295.63 |
$7.13 |
Gold |
$3,444.00 |
$3,322.70 |
$121.30 |
$2,300.20 |
$1,143.80 |
Crude Oil |
$72.52 |
$64.58 |
$7.94 |
$78.62 |
-$6.10 |
Unleaded Gasoline**** |
$2.24 |
$2.08 |
$0.16 |
$2.31 |
-$0.07 |
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
This week, the market remained focused on US-China trade talks in London. After getting off to a slow start, the two countries came to an agreement on a framework for implementing last month's de-escalation (although the deal still awaits approval from President Trump and Chinese President Xi Jinping). The agreement also includes the dialing back of select export restrictions, with the US getting some relief on critical rare earth mineral and magnet export licenses for the next six months. As part of this latest agreement, Chinese students will be able to attend US colleges and universities. For now, the US tariff rate on China goods is 55%, while China’s tariff rate on US goods is 10%. This latest tariff policy news comes amidst rising skepticism about getting deals done by the July 9th reciprocal tariff deadline.
Inflation data was another area of focus. The May Consumer Price Index (CPI) showed that core CPI was up a cooler-than-expected 0.1% month/month (versus an expected 0.3% increase and slightly below April’s 0.2%), while the annualized core rate of 2.8% was slightly below the 2.9% forecast—and near its lowest levels since March 2021. The core reading did not reflect much tariff impact, which may suggest that retailers are absorbing the tariff impact thus far instead of passing the increases through to consumers via price increases. However, some economists suggested that this may have come from retailers drawing down pre-tariff inventory, thus creating an upside risk in months to come as base costs rise. May marked the fourth straight month of cooler CPI data.
A second batch of cooler inflation data came when the May core Producer Price Index (PPI) came in at up 0.1% month/month. This was below the expected 0.3% rise and amidst April’s PPI reading being revised up to (0.2%) from (0.4%) in the original release. Annualized core PPI of 3.0% was also below the 3.1% forecast, and the lowest since August 2024. Some market participants speculated that this pair of cooler inflation data could make it more difficult for the Federal Reserve (Fed) to justify holding rates steady. Meanwhile, the latest Fed messaging continues to highlight patience and more data amidst the continued uncertainty of possible tariff impacts.
During the week, the market began processing rising Middle East tensions after reports that Israel was considering a military strike on Iran. The US ordered partial evacuations of multiple facilities throughout the Middle East, including Iran. Early Friday morning brought news that Israel launched a series of airstrikes on Iran late Thursday under operation “Rising Lion.” These strikes targeted nuclear sites (including Iran’s main enrichment facility in Natanz), nuclear scientists, the country’s ballistic missile program, and military commanders. The IRGC head, Hossein Salami, was apparently killed during these strikes. Israel Prime Minister Netanyahu said that this operation will last for several days until the threat is eliminated. A state of emergency was declared over Israel in anticipation of a missile and drone retaliation. It was confirmed that overnight Iran responded with a launch of more than 100 drones. Supreme Leader Khamanei vowed a severe response, adding that the US would also pay a heavy price. The Trump Administration stated that the US had not been involved in the strikes and warned Iran against targeting US interests or personnel. President Trump also reiterated that Iran cannot have nuclear bomb capabilities, but that he is still hoping for a continuation of negotiations. It is unclear whether previously scheduled talks about the country’s nuclear program will proceed on Sunday. So far, there have not been attacks on Iranian crude oil facilities. Nevertheless, the market is concerned about that possibility, along with the potential for Iran to retaliate by disrupting shipping through the Strait of Hormuz, which facilitates more than 20% of global crude supply. Unsurprisingly, West Texas Intermediate (WTI) crude prices jumped 15% in early Friday morning trading (the biggest jump since May 2020, after Israel launched a series of airstrikes on Iran). But, by mid-day it had backed off to a 7.7% rise, or $73+/barrel. Some estimate a $20/barrel price impact if Iran disrupts flows. The domestic equity market reacted negatively to this news and the major domestic indices moved lower by between 1.2% and 2.0% on Friday. Investors will be watching closely for further developments on this conflict over the weekend.
As of June 12, 2025
Index |
Current Week |
Month of Jun. |
YTD |
Dow Jones Industrial Avg. |
0.49% |
1.73% |
1.81% |
S&P 500 |
0.76% |
2.31% |
3.40% |
Nasdaq |
0.69% |
2.90% |
2.14% |
MSCI EAFE |
0.97% |
1.71% |
19.32% |
Russell Mid Cap |
0.08% |
1.66% |
2.74% |
Russell 2000 |
0.38% |
3.63% |
-3.47% |
