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Key takeaways
- Treasury yields moved lower as geopolitical uncertainties continued to weigh on markets despite largely positive economic data.
- Rising oil prices are expected to dampen future economic growth while adding upward pressure on inflation.
- Spread sectors broadly outperformed similar-duration Treasuries, with strength across high yield, investment grade and mortgage-backed securities.
Market recap
Economic data were largely positive last week, though the backward-looking nature of these releases means the Middle East conflict and its impact on oil prices are not yet reflected. March payrolls showed a robust gain of 178,000 jobs, more than offsetting February's negative print, while the unemployment rate edged down to 4.3%. The ISM manufacturing index improved to 52.7, signaling continued expansion. Meanwhile, the ongoing conflict showed no signs of resolution, and benchmark WTI crude climbed to $112 per barrel.
Despite the healthy data and rising energy costs, Treasury yields fell for the week. The 10-year yield declined -8 basis points to 4.35%, and the Aggregate Bond index returned +0.75%. Broader fixed income markets also gained, led by high yield corporates (+1.21%), investment grade corporates (+1.10%) and mortgage-backed securities (+0.94%).
Outlook
Geopolitical uncertainty and evolving economic conditions have prompted us to revise our macroeconomic forecasts. We now expect real GDP growth of 1.8% this year, modestly below our prior estimate, as higher oil prices weigh on consumer spending. We also expect core inflation to decelerate more slowly, reaching 2.8% by year-end rather than the lower level we previously anticipated.
This updated outlook has implications for U.S. Federal Reserve policy. We no longer expect a rate cut near mid-year; instead, we anticipate the first reduction will come in the second half of 2026, with a second cut now likely slipping into 2027. Our 10-year Treasury yield forecast remains in the 4.00% to 4.25% range, with the expectation that yields will drift toward the lower end as the year progresses.
U.S. Treasury market yields
| Maturity | Yield | Week | March 2026 | Year-to-date |
|---|---|---|---|---|
| 2-year | 3.84 | -0.07 | 0.05 | 0.37 |
| 5-year | 3.99 | -0.08 | 0.04 | 0.26 |
| 10-year | 4.35 | -0.08 | 0.03 | 0.18 |
| 30-year | 4.91 | -0.06 | 0.00 | 0.07 |
| Source: Bloomberg L.P., 03 Apr 2026. Performance data shown represents past performance and does not predict or guarantee future results. | ||||
Fixed income markets rallied broadly last week, as declining Treasury yields and strong spread sector performance delivered positive returns across asset classes.
Fixed income characteristics and returns
| Index | Yield to worst (%) | Spread (bps) | Effective duration (years) | Returns (%) | ||
|---|---|---|---|---|---|---|
| Week | March 2026 | Year-to-date | ||||
| Municipal | 3.73 | - | 6.80 | 0.73 | 0.32 | 0.15 |
| High yield municipal | 5.64 | 157¹ | 7.63 | 0.82 | 0.33 | 1.04 |
| Taxable municipal | 5.00 | 52² | 7.61 | 0.65 | -0.32 | 0.11 |
| U.S. aggregate bond | 4.59 | 27² | 5.92 | 0.75 | 0.00 | -0.04 |
| U.S. Treasury | 4.18 | - | 5.87 | 0.51 | -0.10 | -0.15 |
| U.S. government related | 4.58 | 39² | 5.32 | 0.55 | -0.02 | -0.09 |
| U.S. corporate investment grade | 5.14 | 82² | 6.85 | 1.10 | 0.19 | -0.35 |
| U.S. mortgage-backed securities | 4.82 | 19² | 5.39 | 0.94 | 0.04 | 0.45 |
| U.S. commercial mortgage-backed securities | 4.71 | 70² | 3.79 | 0.35 | -0.15 | 0.16 |
| U.S. asset-backed securities | 4.45 | 52² | 2.80 | 0.26 | -0.05 | 0.26 |
| Preferred securities | 6.44 | 179² | 5.65 | 0.74 | 0.49 | -0.15 |
| High yield 2% issuer capped | 7.27 | 299² | 3.01 | 1.21 | 0.40 | -0.09 |
| Senior loans³ | 8.76 | 513 | 0.25 | 0.11 | 0.05 | -0.43 |
| Collateralized loan obligations, AA | 5.27 | 155² | 0.25 | 0.16 | 0.07 | 1.06 |
| Collateralized loan obligations, BB | 12.23 | 829² | 0.25 | 0.32 | 0.11 | -3.05 |
| Global emerging markets | 6.26 | 200² | 5.92 | 0.64 | 0.33 | -1.02 |
| Global aggregate (unhedged) | 3.78 | 30² | 6.31 | 0.78 | 0.26 | -0.82 |
| 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, 03 Apr 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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