Fixed Income Update
The government shutdown, now well into its third week, marks the second longest on record. During this time, the bond market has been trudging along like a traveler lost in the desert, searching for water - in this case, economic data. Privately collected reports released this month, such as ADP’s employment figures and the University of Michigan’s consumer sentiment survey, have offered little substance - mere mirages for a market starved for direction.
A glimmer of hope finally appeared on Friday when the Bureau of Labor Statistics (BLS) released September’s inflation data. Originally scheduled for October 15th, the release was delayed due to the shutdown. However, BLS employees were recalled to ensure the data was available for the Social Security Administration’s annual cost-of-living adjustments. Despite being the only government data release in nearly a month, it arrived with relatively little fanfare.
Headline CPI rose 0.3% in September, while Core CPI - which excludes food and energy - rose 0.2%, both a tenth of a percentage point below expectations. On a year-over-year basis, headline CPI increased to 3.0%, while the core rate edged down from 3.1% to 3.0%. Treasury yields fell in response, with 2-year yields dropping more than 5 basis points in early Friday trading - marking the bond market’s first real signs of life this month.
While inflation remains elevated compared to the Fed’s target, the data continues a trend of relatively benign prints throughout the year, despite earlier concerns about the inflationary impact of tariffs. In short, inflation has been less severe than feared, allowing the Fed to shift its focus toward the labor market and resume rate cuts.
This week’s inflation report all but guarantees a 25 basis point rate cut at next week’s Fed meeting and raises the likelihood of another cut in December. Markets are currently pricing in nearly five rate cuts by the end of 2026, which would bring the Fed Funds Rate below 3% - the level considered neutral, or neither restrictive nor stimulative - a full year ahead of the Fed’s own projections.
Looking ahead, the data void will persist as long as the government remains shut down. At this point, November’s releases are in jeopardy, as government workers would have needed to collect October’s data for next month’s reports. With just a week left in October, it seems increasingly likely that the market will face another month of flying blind. Next week’s Fed meeting will be the clear highlight.
As of October 17, 2025
|
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
|
Tax-exempt MMF |
2.38% |
2.49% |
-.11% |
3.60% |
-1.22% |
|
Taxable MMF |
4.12% |
4.10% |
.02% |
4.82% |
-.70% |
|
|
|
|
|
|
|
|
2-Year Treasury |
3.47% |
3.46% |
.01% |
4.08% |
-.61% |
|
5-Year Treasury |
3.59% |
3.59% |
.00% |
4.03% |
-.44% |
|
10-Year Treasury |
3.99% |
4.01% |
-.02% |
4.21% |
-.22% |
|
30-Year Treasury |
4.58% |
4.61% |
-.02% |
4.48% |
.11% |
|
5-Year Exp. Inflation |
2.39% |
2.33% |
.07% |
2.22% |
.18% |
|
|
|
|
|
|
|
|
2-Year Corporate* |
3.85% |
3.84% |
.02% |
4.37% |
-.51% |
|
5-Year Corporate* |
4.13% |
4.12% |
.01% |
4.55% |
-.42% |
|
10-Year Corporate* |
4.73% |
4.74% |
-.01% |
4.99% |
-.26% |
|
30-Year Corporate* |
5.38% |
5.41% |
-.02% |
5.40% |
-.01% |
|
|
|
|
|
|
|
|
2-Year Municipal** |
2.55% |
2.48% |
.07% |
2.71% |
-.16% |
|
5-Year Municipal** |
2.44% |
2.41% |
.04% |
2.77% |
-.32% |
|
10-Year Municipal** |
2.81% |
2.92% |
-.11% |
3.16% |
-.35% |
|
30-Year Municipal** |
4.28% |
4.34% |
-.06% |
4.09% |
.19% |
|
|
|
|
|
|
|
|
10-Year German Govt Bond |
2.63% |
2.58% |
.05% |
2.26% |
.36% |
|
10-Year U.K. Govt Bond |
4.43% |
4.53% |
-.10% |
4.24% |
.19% |
|
10-Year Japanese Govt Bond |
1.65% |
1.62% |
.03% |
.94% |
.70% |
|
10-Year Spanish Govt Bond |
3.16% |
3.10% |
.06% |
2.95% |
.21% |
|
10-Year Italian Govt Bond |
3.42% |
3.38% |
.04% |
3.47% |
-.06% |
|
|
|
|
|
|
|
|
Fed Funds |
4.25% |
4.25% |
.00% |
5.00% |
-.75% |
|
Prime Rate |
7.25% |
7.25% |
.00% |
8.00% |
-.75% |
|
Dollar*** |
$98.92 |
$98.43 |
$0.49 |
$104.06 |
-$5.14 |
|
CRB |
$305.02 |
$293.35 |
$11.67 |
$282.38 |
$22.64 |
|
Gold |
$4,074.90 |
$4,189.90 |
-$115.00 |
$2,734.90 |
$1,340.00 |
|
Crude Oil |
$62.29 |
$57.54 |
$4.75 |
$70.19 |
-$7.90 |
|
Unleaded Gasoline**** |
$1.94 |
$1.84 |
$0.10 |
$1.91 |
$0.03 |
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
Despite a volatile trade headline backdrop, US stocks continued their 2025 march higher this week. Through Thursday’s close, major US stock indices traded higher by more than 1% for the week. Friday morning saw the S&P 500 Index trade to a new intraday all-time high as the index pushed above the 6,800 level. A solid start to third quarter (Q3) earnings season, a cooler-than-expected inflation report, and some positive headlines regarding US-China trade helped to drive US market moves this week.
Although the trading week opened with solid gains for US stocks on Monday, it was not entirely smooth sailing for equities this week. Trade headlines were volatile, and market sentiment shifted back and forth as the week progressed. Early in the week President Trump expressed optimism regarding a trade deal being reached with China. Trump then proceeded to pour cold water on positive US-China trade sentiment after stating “Maybe it won’t happen,” in reference to a meeting between Trump and Chinese President Xi set for next week. Additionally, it was reported the White House may curb US exports (exports made with US software) to China. The export curb under consideration is likely a response to China’s rare earth minerals policies. The resultant uptick in trade tensions sent US stocks lower mid-week. US equities managed to quickly recover on Thursday after the White House confirmed that Trump and Xi are scheduled to meet next week on the 30th.
Early week headlines expressed some optimism for the government shutdown to possibly be over by end of week. Ultimately, no real progress was made in bipartisan negotiations with healthcare remaining a key negotiating hurdle for both sides. Some suggest this shutdown may become the longest on record.
While there has been a lack of economic data since the government shutdown commenced October 1st, the market did receive an inflation update Friday morning with the release of the September Consumer Price Index (CPI). September inflation data was cooler than expected, as core CPI showed a 0.2% increase month/month vs. expectations of 0.3%. While inflation remained above the Fed’s 2% target, the cooler-than-expected number, and lack of fresh employment data, has left the market broadly expecting the Fed will announce a 25-basis point interest rate cut next week. The inflation update lifted the probability of another interest rate cut from the Federal Open Market Committee (FOMC) at its December meeting as well. As of Friday morning, the CME FedWatch Tool showed a greater than 96% chance of a December rate cut vs. a 91.1% probability the previous day.
Q3 earnings season is off to a good start, highlighted by solid quarterly results from big US banks last week. Per FactSet, the blended earnings per share growth rate for the S&P 500 Index is at 9.2%, 130 basis points better than the September 30th estimate of 7.9%. A potentially highly influential week of earnings is in front of the market with five of the seven Magnificent Seven names set to report quarterly results next week. Furthermore, the October FOMC meeting will take place October 28th and 29th, with a rate decision and Fed Chair Powell’s commentary both on Wednesday. Also, as previously mentioned, Trump and Xi are set to meet and discuss trade on Thursday. As such, next week may play a significant role in determining the trajectory of US stock performance for the remainder of the year.
As of October 23, 2025
|
Index |
Current Week |
Month of Oct. |
YTD |
|
Dow Jones Industrial Avg. |
1.20% |
0.79% |
11.35% |
|
S&P 500 |
1.12% |
0.80% |
15.76% |
|
Nasdaq |
1.15% |
1.26% |
19.41% |
|
MSCI EAFE |
0.98% |
1.37% |
27.44% |
|
Russell Mid Cap |
1.59% |
0.28% |
10.73% |
|
Russell 2000 |
1.25% |
1.93% |
12.52% |
