Fixed Income Update
Treasury yields fell to their lowest levels in two weeks as hopes for a ceasefire with Iran improved market sentiment and reduced demand for safe-haven assets. The move was also shaped by fresh inflation data, which gave investors additional information about the path of prices and potential Federal Reserve policy.
News of possible diplomatic progress helped pull oil prices down from recent highs, which in turn supported the decline in Treasury yields. Even so, the move remained somewhat restrained because President Trump had not yet approved the proposed accord, and the conflict continued despite earlier reports of progress in negotiations. In our view, the developments point to improving diplomatic momentum, even after the United States struck military targets earlier this week, and markets appear to be responding to the possibility that further escalation may be avoided.
On Thursday, the latest reading on personal consumption expenditures, or PCE, showed that prices rose 0.4% overall and 0.2% excluding food and energy. Economists had expected increases of 0.5% and 0.3%, respectively, so the monthly figures were somewhat softer than forecast. However, the year-over-year core rate, which Federal Reserve policymakers watch closely and generally aim to keep near 2%, rose to 3.8%, its highest level since May 2023. Speaking later that afternoon, Treasury Secretary Scott Bessent said the president would secure a deal with Iran that would reopen the Strait of Hormuz and help return the United States to a period of substantial disinflation.
Although this week’s inflation data appeared somewhat better than expected on the surface, the Federal Reserve’s tone has continued to shift in a more hawkish direction as the conflict has raised concerns about energy-driven price pressure. Fed Governor Lisa Cook said this week that the central bank is prepared to raise rates if disinflation does not resume in a timely manner. Governor Chris Waller, who dissented in favor of a rate cut as recently as January, has also changed his stance and now argues that the energy shock could threaten long-term price stability. That shift may be especially notable because Waller had been viewed as one of the more dovish members of the Fed only a few months ago and was considered a leading candidate for the chairmanship. If inflation remains elevated in the months ahead, we would expect the more hawkish members of the FOMC to make the case for additional rate hikes in order to keep financial conditions from becoming too accommodative.
As of May 29, 2026
|
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
|
Tax-exempt MMF |
1.83% |
2.01% |
-.18% |
2.56% |
-.73% |
|
Taxable MMF |
3.63% |
3.62% |
.01% |
4.28% |
-.65% |
|
|
|
|
|
|
|
|
2-Year Treasury |
3.99% |
4.12% |
-.13% |
3.94% |
.05% |
|
5-Year Treasury |
4.13% |
4.26% |
-.13% |
4.00% |
.13% |
|
10-Year Treasury |
4.43% |
4.56% |
-.13% |
4.42% |
.01% |
|
30-Year Treasury |
4.97% |
5.07% |
-.09% |
4.92% |
.06% |
|
5-Year Exp. Inflation |
2.52% |
2.55% |
-.02% |
2.40% |
.12% |
|
|
|
|
|
|
|
|
2-Year Municipal** |
2.57% |
2.66% |
-.09% |
2.85% |
-.28% |
|
5-Year Municipal** |
2.71% |
2.87% |
-.17% |
2.94% |
-.23% |
|
10-Year Municipal** |
3.12% |
3.34% |
-.22% |
3.46% |
-.34% |
|
30-Year Municipal** |
4.51% |
4.65% |
-.15% |
4.85% |
-.34% |
|
|
|
|
|
|
|
|
Fed Funds |
3.75% |
3.75% |
.00% |
4.50% |
-.75% |
|
Prime Rate |
6.75% |
6.75% |
.00% |
7.50% |
-.75% |
|
Dollar*** |
$98.88 |
$99.24 |
-$0.36 |
$99.28 |
-$0.40 |
|
CRB |
$384.61 |
$392.67 |
-$8.06 |
$290.76 |
$93.85 |
|
Gold |
$4,564.80 |
$4,523.20 |
$41.60 |
$3,317.10 |
$1,247.70 |
|
Crude Oil |
$86.72 |
$96.60 |
-$9.88 |
$60.94 |
$25.78 |
|
Unleaded Gasoline**** |
$3.07 |
$3.45 |
-$0.38 |
$1.95 |
$1.12 |
* 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
US equities were set to close out May with a second straight month of strong gains. The April/May rally has been supported by easing geopolitical concerns and renewed AI enthusiasm. Technology stocks continued to lead the US market higher as semiconductor names extended their rally and the software space joined the move this week. Major US indices touched fresh record highs, reinforcing the upward momentum shown in recent weeks.
Investor sentiment was boosted by encouraging headlines which suggested diplomatic progress between the US and Iran. Reports indicated the two sides had reached a tentative agreement for a 60-day ceasefire extension. The framework agreement reportedly would remove transit restrictions through the Strait of Hormuz and set up negotiations on Iran’s nuclear program. In response, both oil prices and Treasury yields moved lower on the week, with West Texas Intermediate crude falling below $87/barrel and the 10-Year Treasury yield retreating below 4.5%. While headline risk persists, and US-Iran tensions ebb and flow, the market continues to lean in the direction of a diplomatic resolution.
In conjunction with the improving geopolitical situation, the momentum and AI trades remained a key driver of market performance. Strong earnings and guidance from Snowflake (SNOW) and Dell Technologies (DELL) supported software and broader AI sentiment this week, with SNOW up more than 36% on Thursday and DELL up more than 30% Friday morning. Meanwhile, semiconductor and memory stocks continued to charge higher. The iShares Semiconductor ETF gained more than 5% for the week and was higher by an eye-popping 89% year to date. The iShares Expanded Tech-Software ETF (IGV) advanced more than 7% on the week, with software sentiment receiving a boost from SNOW’s quarterly results/outlook. Memory name Micron Technology (MU) added to recent momentum, rising more than 19% on Tuesday following a very bullish price-target increase; MU crossed the $1 trillion market-capitalization this week as the stock extended its torrid run higher in 2026, up more than 230% year to date.
While the S&P 500 and Nasdaq traded higher by more than 5% and 8% in the month of May, performance appeared to be somewhat narrow with only four of eleven S&P 500 sector indices positive for the month, and Information Technology the only sector to outperform the broader S&P 500. While recent gains have been strongly tied to AI infrastructure plays, a meaningful US-Iran peace agreement, and reduced inflation worries, could drive some renewed market broadening.
Looking ahead, investors are faced with a heavy slate of macro data, including ISM Manufacturing and Services PMIs and the May nonfarm payrolls report. Recent Federal Reserve (Fed) commentary continued to lean hawkish, with officials still focused on inflation risks tied to geopolitical pressures. According to the CME FedWatch Tool, there is a 44% chance of a rate hike before year end. A key question is whether fresh macro data and further progress in US-Iran talks might alter those expectations.
As of May 28, 2026
|
Index |
Current Week |
Month of May |
YTD |
|
Dow Jones Industrial Avg. |
0.19% |
2.20% |
6.10% |
|
S&P 500 |
1.21% |
5.03% |
11.02% |
|
Nasdaq |
2.18% |
8.21% |
16.09% |
|
MSCI EAFE |
0.30% |
2.38% |
8.89% |
|
Russell Mid Cap |
1.18% |
2.69% |
11.65% |
|
Russell 2000 |
2.36% |
4.97% |
18.83% |
