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Key takeaways
- The ongoing Middle East conflict pushed oil prices higher, with WTI crude ending the week back above $100 per barrel.
- Treasury yields rose as markets priced in renewed upside inflation risk driven by higher energy prices.
- Spreads widened across most asset classes, as elevated oil prices also raised concerns about slower economic growth.
Market recap
The Middle East conflict remained the dominant market theme last week. Oil prices initially declined on optimism around ceasefire negotiations, but those hopes faded as the week progressed, with WTI crude ending back above $100 per barrel.
U.S. Treasury yields moved higher as markets continued to price in the risk of oil-driven inflation. 10-year yields rose 5 basis points (bps) to 4.43%, pulling the Bloomberg U.S. Aggregate Bond Index down -0.12% for the week. Spreads widened broadly across fixed income, particularly late in the week as oil prices climbed. High yield corporates underperformed duration-equivalent Treasuries by -46 bps, followed by preferreds at -45 bps and emerging markets at -23 bps. CMBS and MBS were relative bright spots, underperforming by just -1 and -2 bps, respectively.
Outlook
Markets face a busy week of U.S. and global data. March PMI readings for the U.S. and China will offer an early read on how the Middle East conflict is affecting business sentiment. The February Job Openings and Labor Turnover Survey (JOLTS) report should shed further light on labor market conditions, particularly relevant after the slowdown in headline job creation that month. The March jobs report (released at the end of April) will be a key release, where we expect a rebound in job creation and a steady unemployment rate.
We continue to expect two 25-basis-point U.S. Federal Reserve rate cuts this year, though near-term inflationary pressures may extend the current pause and push the second cut into 2027. We still expect core inflation to moderate somewhat by year-end. Combined with potential headwinds to growth and softer labor market data, that should keep long-end yields contained. We continue to forecast a 4.00% to 4.25% trading range for the 10-year Treasury yield this year. While the 10-year currently sits above the top of that range, we still expect it to finish the year near the bottom.
U.S. Treasury market yields
| Maturity | Yield | Week | Month-to-date | Year-to-date |
|---|---|---|---|---|
| 2-year | 3.91 | 0.01 | 0.54 | 0.44 |
| 5-year | 4.07 | 0.06 | 0.57 | 0.34 |
| 10-year | 4.43 | 0.05 | 0.49 | 0.26 |
| 30-year | 4.97 | 0.03 | 0.35 | 0.12 |
| Source: Bloomberg L.P., 27 Mar 2026. Performance data shown represents past performance and does not predict or guarantee future results. | ||||
Treasury yields rose and spreads widened across fixed income markets, as higher oil prices stoked near-term inflation concerns and raised the prospect of slower growth.
Fixed income characteristics and returns
| Index | Yield to worst (%) | Spread (bps) | Effective duration (years) | Returns (%) | ||
|---|---|---|---|---|---|---|
| Week | Month-to-date | Year-to-date | ||||
| Municipal | 3.83 | - | 6.81 | -0.81 | -2.72 | -0.58 |
| High yield municipal | 5.69 | 150¹ | 7.61 | -0.75 | -2.38 | 0.22 |
| Taxable municipal | 5.07 | 54² | 7.55 | -0.18 | -3.08 | -0.54 |
| U.S. aggregate bond | 4.69 | 30² | 5.87 | -0.12 | -2.49 | -0.79 |
| U.S. Treasury | 4.24 | - | 5.79 | -0.07 | -2.34 | -0.66 |
| U.S. government related | 4.65 | 39² | 5.27 | -0.14 | -2.28 | -0.63 |
| U.S. corporate investment grade | 5.27 | 89² | 6.73 | -0.23 | -2.86 | -1.43 |
| U.S. mortgage-backed securities | 4.99 | 26² | 5.45 | -0.08 | -2.53 | -0.49 |
| U.S. commercial mortgage-backed securities | 4.78 | 70² | 3.78 | -0.07 | -1.79 | -0.19 |
| U.S. asset-backed securities | 4.51 | 50² | 2.80 | -0.03 | -1.10 | 0.00 |
| Preferred securities | 6.57 | 184² | 5.52 | -0.55 | -2.52 | -0.88 |
| High yield 2% issuer capped | 7.68 | 331² | 3.10 | -0.47 | -1.97 | -1.29 |
| Senior loans³ | 8.80 | 513 | 0.25 | 0.02 | 0.55 | -0.54 |
| Collateralized loan obligations, AA | 5.30 | 154² | 0.25 | 0.12 | -0.01 | 0.89 |
| Collateralized loan obligations, BB | 12.36 | 836² | 0.25 | 0.31 | -2.23 | -3.36 |
| Global emerging markets | 6.33 | 200² | 5.86 | -0.32 | -3.18 | -1.65 |
| Global aggregate (unhedged) | 3.87 | 32² | 6.24 | -0.49 | -3.58 | -1.59 |
| 1 Yield difference between the Bloomberg High Yield Municipal Index and the 20-year AAA MMD scale. 2 Option-adjusted spread to Treasuries. 3 Spread refers to the 3-year discount margin. Duration is estimated based on the frequency of the reset date. Source: Bloomberg L.P. and Standard & Poor's, 27 Mar 2026. Performance data shown represents past performance and does not predict or guarantee future results. Unless otherwise noted, the index is Bloomberg. All index returns are shown in U.S. dollars. Yield to worst is the lowest potential yield that can be received on a bond without the issuer actually defaulting. Effective duration (expressed in years) measures the price sensitivity of a fixed-income investment to a change in interest rates, considering that expected cash flows will fluctuate as interest rates change. Index performance is shown for illustrative purposes only. Index returns include reinvestment of income and do not reflect investment advisory and other fees that would reduce performance in an actual client account. |
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Representative indexes: municipal: Bloomberg Municipal Index; high yield municipal: Bloomberg High Yield Municipal Index; taxable municipal: Bloomberg Taxable Municipal Bond Index; U.S. aggregate bond: Bloomberg U.S. Aggregate Bond Index; U.S. Treasury: Bloomberg U.S. Treasury Index; U.S. government related: Bloomberg U.S. Government-Related Index; U.S. corporate investment grade: Bloomberg U.S. Corporate Index; U.S. mortgage-backed securities; Bloomberg U.S. Mortgage-Backed Securities Index; U.S. commercial mortgage-backed securities: Bloomberg CMBS ERISA-Eligible Index; U.S. asset-backed securities: Bloomberg Asset-Backed Securities Index; preferred securities: ICE BofA U.S. All Capital Securities Index; high yield 2% issuer capped: Bloomberg High Yield 2% Issuer Capped Index; senior loans: S&P UBS Leveraged Loan Index; CLO AA: J.P. Morgan Collateralized Loan Obligation AA Index; CLO BB: J.P. Morgan Collateralized Loan Obligation BB Index; global emerging markets: Bloomberg Emerging Market USD Aggregate Index; global aggregate: Bloomberg Global Aggregate Unhedged Index.
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her financial professionals.
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on nuveen.com. Please note, it is not possible to invest directly in an index.
Important information on risk
Investing involves risk; principal loss is possible. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, derivatives risk, dollar roll transaction risk and income risk. As interest rates rise, bond prices fall. Below investment grade or high yield debt securities are subject to liquidity risk and heightened credit risk. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure and therefore are subject to greater credit risk. Foreign investments involve additional risks, including currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks may be magnified in emerging markets. Asset-backed and mortgage-backed securities are subject to additional risks such as prepayment risk, liquidity risk, default risk and adverse economic developments. The value of convertible securities may decline in response to such factors as rising interest rates and fluctuations in the market price of the underlying securities. Senior loans are subject to loan settlement risk due to the lack of established settlement standards or remedies for failure to settle. These investments are subject to credit risk and potentially limited liquidity, as well as interest rate risk, currency risk, prepayment and extension risk, and inflation risk. Any investment in collateralized loan obligations or other structured vehicles involves significant risks not associated with more conventional investment alternatives.
Investors should contact a tax professional regarding the appropriateness of tax-exempt investments in their portfolio. If sold prior to maturity, municipal securities are subject to gain/losses based on the level of interest rates, market conditions and the credit quality of the issuer. Income may be subject to the alternative minimum tax (AMT) and/or state and local taxes, based on the state of residence. Income from municipal bonds held by a portfolio could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.
Nuveen, LLC provides investment solutions through its investment specialists.
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her financial professionals.
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on nuveen.com. Please note, it is not possible to invest directly in an index.
Important information on risk
Investing involves risk; principal loss is possible. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, derivatives risk, dollar roll transaction risk and income risk. As interest rates rise, bond prices fall. Below investment grade or high yield debt securities are subject to liquidity risk and heightened credit risk. Preferred securities are subordinated to bonds and other debt instruments in a company’s capital structure and therefore are subject to greater credit risk. Foreign investments involve additional risks, including currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks may be magnified in emerging markets. Asset-backed and mortgage-backed securities are subject to additional risks such as prepayment risk, liquidity risk, default risk and adverse economic developments. The value of convertible securities may decline in response to such factors as rising interest rates and fluctuations in the market price of the underlying securities. Senior loans are subject to loan settlement risk due to the lack of established settlement standards or remedies for failure to settle. These investments are subject to credit risk and potentially limited liquidity, as well as interest rate risk, currency risk, prepayment and extension risk, and inflation risk. Any investment in collateralized loan obligations or other structured vehicles involves significant risks not associated with more conventional investment alternatives.
Investors should contact a tax professional regarding the appropriateness of tax-exempt investments in their portfolio. If sold prior to maturity, municipal securities are subject to gain/losses based on the level of interest rates, market conditions and the credit quality of the issuer. Income may be subject to the alternative minimum tax (AMT) and/or state and local taxes, based on the state of residence. Income from municipal bonds held by a portfolio could be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.
Nuveen, LLC provides investment solutions through its investment specialists.
This information does not constitute investment research as defined under MiFID.
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