Fixed Income
BETATreasury yields, credit spreads, and sovereign bonds
Treasury Yield Curve
Current vs. 1 Year Ago
| Rate | Current | Change | Description |
|---|---|---|---|
| Fed Funds Rate | 5.38% | 0.00% | Upper bound of target range |
| Prime Rate | 8.50% | 0.00% | Bank lending base rate |
| SOFR (30-day) | 5.31% | -0.02% | Secured Overnight Financing Rate |
| 30Y Mortgage Rate | 6.87% | -0.05% | US 30-year fixed mortgage avg |
| AAA Corp Bond Yield | 5.12% | -0.03% | Investment grade spread |
| HY Bond Yield | 7.84% | +0.12% | High yield / junk bonds |
| 3-Month T-Bill | 5.27% | -0.01% | Short-term risk-free rate |
IG Corporate
High Yield
EM Sovereign
Rate Trajectory
The Fed is likely to begin easing in Q3 2026 with two 25bp cuts expected by year-end, conditional on PCE sustainably approaching 2.5%. The market-implied terminal rate of 3.75% appears achievable by mid-2027, though upside inflation risks from tariffs and wage growth may delay the timeline.
Duration Risk
Duration risk remains elevated with 10Y yields at 4.38%. A bear-steepening scenario — where long-end yields rise faster than short-end — is the primary risk. Investors should consider barbell strategies (very short + very long) rather than intermediate duration exposure.
Credit Quality
Investment grade spreads at 92bps are historically tight, suggesting limited upside from credit compression. High yield at 312bps offers more carry, though default rates are expected to tick up to 3.5% in 2026. Selective EM debt in Brazil and Mexico offers attractive risk-adjusted yields at current levels.
International Bonds
JGBs face structural headwinds as the BOJ normalizes policy — avoid duration in Japanese government bonds. Bunds at 2.41% look fair given ECB cut expectations. UK gilts at 4.13% offer value relative to their historical spread versus USTs. Consider hedged allocation to Eurozone periphery as ECB provides support.