Fixed Income Update
Geopolitical developments took center stage this week as hopes for a quick resolution to the conflict in Iran faded. The uncertainty has weighed on risk assets globally while pushing energy prices and inflation expectations higher. For the bond market, the wide range of potential outcomes has made it difficult for yields to find a clear anchor. As a result, the Treasury market is on track for its worst week since last April, with rising oil prices overshadowing what was otherwise a notably weak jobs report.
Treasury yields moved sharply higher across the curve. Two-year yields rose about 18 basis points on the week, while 10-year yields climbed more than 20 basis points. Much of the move has been tied to the surge in energy prices. Brent crude briefly traded above $90 per barrel for the first time in two years, while West Texas Intermediate jumped more than 30% this week to around $88 per barrel. Gasoline futures also rose roughly 20%.
As energy prices moved higher, market-based inflation expectations followed. One-year inflation expectations climbed from 3.8% last week to 4.6%, while five-year expectations increased from 2.45% to 2.65%. If those trends persist, they are likely to draw the attention of Federal Reserve policymakers. The Fed has remained cautious on rate cuts, having spent much of 2025 waiting to assess the inflationary effects of tariffs. That cautious stance has carried into this year as policymakers continue to look for clearer signals on the direction of inflation and economic growth.
Under normal circumstances, Friday’s employment report would have been the market’s main focus. Instead, it took a back seat to geopolitical headlines. The Bureau of Labor Statistics reported that the U.S. economy unexpectedly lost 92,000 jobs in February, compared with expectations for a modest gain of about 55,000. The unemployment rate also ticked higher, rising from 4.3% to 4.4%. A softer labor market combined with rising energy prices and inflation expectations complicates the outlook for the Fed.
For now, however, the bond market’s attention remains squarely on developments in the Middle East. Interest rate swap markets show that investors have also pulled back their expectations for Fed easing this week. Markets are now pricing roughly 45 basis points of rate cuts by year-end, down from more than 60 basis points expected just a week ago.
As of March 06, 2026
|
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
|
Tax-exempt MMF |
1.85% |
2.12% |
-.27% |
2.12% |
-.27% |
|
Taxable MMF |
3.68% |
3.69% |
-.01% |
4.34% |
-.66% |
|
|
|
|
|
|
|
|
2-Year Treasury |
3.56% |
3.38% |
.18% |
3.96% |
-.40% |
|
5-Year Treasury |
3.73% |
3.50% |
.23% |
4.06% |
-.33% |
|
10-Year Treasury |
4.16% |
3.94% |
.22% |
4.28% |
-.12% |
|
30-Year Treasury |
4.79% |
4.61% |
.17% |
4.58% |
.21% |
|
5-Year Exp. Inflation |
2.64% |
2.45% |
.19% |
2.57% |
.07% |
|
|
|
|
|
|
|
|
2-Year Corporate* |
3.89% |
3.76% |
.13% |
4.35% |
-.46% |
|
5-Year Corporate* |
4.26% |
4.10% |
.16% |
4.67% |
-.41% |
|
10-Year Corporate* |
4.90% |
4.76% |
.13% |
5.13% |
-.24% |
|
30-Year Corporate* |
5.66% |
5.57% |
.08% |
5.59% |
.06% |
|
|
|
|
|
|
|
|
2-Year Municipal** |
2.20% |
2.08% |
.12% |
2.63% |
-.43% |
|
5-Year Municipal** |
2.35% |
2.22% |
.13% |
2.75% |
-.41% |
|
10-Year Municipal** |
2.81% |
2.67% |
.14% |
3.05% |
-.23% |
|
30-Year Municipal** |
4.39% |
4.36% |
.03% |
4.35% |
.05% |
|
|
|
|
|
|
|
|
10-Year German Govt Bond |
2.86% |
2.64% |
.22% |
2.83% |
.03% |
|
10-Year U.K. Govt Bond |
4.67% |
4.23% |
.44% |
4.66% |
.01% |
|
10-Year Japanese Govt Bond |
2.16% |
2.10% |
.05% |
1.53% |
.62% |
|
10-Year Spanish Govt Bond |
3.35% |
3.06% |
.29% |
3.45% |
-.09% |
|
10-Year Italian Govt Bond |
3.63% |
3.27% |
.36% |
3.96% |
-.33% |
|
|
|
|
|
|
|
|
Fed Funds |
3.75% |
3.75% |
.00% |
4.50% |
-.75% |
|
Prime Rate |
6.75% |
6.75% |
.00% |
7.50% |
-.75% |
|
Dollar*** |
$99.17 |
$97.61 |
$1.57 |
$104.06 |
-$4.89 |
|
CRB |
$336.85 |
$312.67 |
$24.18 |
$301.07 |
$35.78 |
|
Gold |
$5,149.40 |
$5,247.90 |
-$98.50 |
$2,926.60 |
$2,222.80 |
|
Crude Oil |
$88.95 |
$67.02 |
$21.93 |
$66.36 |
$22.59 |
|
Unleaded Gasoline**** |
$2.70 |
$2.29 |
$0.42 |
$2.01 |
$0.70 |
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
Geopolitical events ratcheted volatility higher following US and Israeli strikes that killed Iran’s Supreme Leader Ayatollah Ali Khamenei. This week saw the CBOE Volatility Index jump to its highest intraday levels since the first half of 2025. The price of West Texas Intermediate Crude oil spiked by more than 30%, trading above $90/barrel as of Friday morning, in response to the evolving conflict with Iran. Although US stocks showed relative resilience for much of the week, major US indices ultimately succumbed to growing uncertainties as the week wore on. Through Thursday’s market close, major US indices were mostly lower. US stocks moved lower Friday morning in response to comments from President Trump and February jobs data.
While headline updates caused some large intraday market swings, US stocks held up relatively well through mid-week as investors assessed the evolving conflict with Iran and the potential economic ramifications. As the week progressed, Defense Secretary Pete Hegseth warned the conflict with Iran could last a few months, roughly twice the duration noted by President Trump earlier in the week. Trump said Friday morning there would be no deal made without Iran outside of its ‘Unconditional Surrender;’ Iran has yet to show any desire to negotiate. With no signs of de-escalation, and a jump in energy prices and inflation worries, investors leaned risk-off.
With Persian Gulf tanker traffic essentially stalled, the price of oil surged as the market assessed supply risks. Over 20% of the global oil trade passes through the Strait of Hormuz. Further adding to the uncertainty was the possibility of Gulf producers having to enact shut-ins which essentially means producers would have to temporarily halt production given storage constraints. These items lifted the prospect of a supply shock. To ease supply concerns, Trump stated the US would provide military escorts and insurance guarantees to maritime vessels passing through the strait. The announcement briefly helped to pause this week’s price move, but ultimately oil prices resumed moving higher. This week’s spike in oil prices heightened inflation and growth concerns and called into question Federal Reserve (Fed) rate cut expectations for the year.
Historically, geopolitical events have provided buying opportunities, a buy the dip mindset may have helped to negate inflation and growth concerns weighing on investors’ minds early in the week. Also supportive was economic data, including February’s ISM Manufacturing and ISM Services prints. The former topped consensus and sat in expansionary territory for the second consecutive month while the latter print showed its best reading since 2022. That rosier macro picture flipped on Friday with February’s Nonfarm Payrolls figure showing an unexpected decline of 92,000 and a higher unemployment rate of 4.4%. While softer jobs data pressured market sentiment, Fed rate cut odds for June rose in response.
As the conflict with Iran continues to evolve, market volatility may remain relatively elevated until greater geopolitical clarity arrives.
As of March 05, 2026
|
Index |
Current Week |
Month of Mar. |
YTD |
|
Dow Jones Industrial Avg. |
-2.00% |
-2.00% |
0.08% |
|
S&P 500 |
-0.68% |
-0.68% |
-0.01% |
|
Nasdaq |
0.37% |
0.37% |
-2.04% |
|
MSCI EAFE |
-6.12% |
-6.12% |
3.37% |
|
Russell Mid Cap |
-2.02% |
-2.02% |
4.83% |
|
Russell 2000 |
-1.75% |
-1.75% |
4.34% |
