Contact us
Contact Nuveen
Thank you for your message. We will contact you shortly.
Key takeaways
- July payrolls unexpectedly contracted, sharply reducing market expectations for a September Fed hike.
- Treasuries rallied broadly, led by the front end, reversing prior bear-steepening and pushing bond volatility to multi-month highs.
- Credit fundamentals remain supportive; strong earnings and softer labor data reinforce our preference for high-quality income and spread sector exposure.
Market recap
Friday’s July U.S. payrolls report dominated attention, revealing an unexpected job contraction and a downward revision to the prior month. The data curbed expectations for a September U.S. Federal Reserve rate hike and sparked a broad fixed income rally. Earlier in the week, Middle East tensions kept energy markets on edge, with Brent oil prices briefly topping $82 before easing on reports of a potential Iran-Oman deal. The Treasury curve rallied, led by the front end, reversing much of the prior week’s bear-steepening. Bond volatility climbed to its highest level since May.
Returns were positive across fixed income sectors. The Bloomberg Aggregate U.S. Bond Index returned +0.60%, investment grade corporates +0.66% and preferreds +0.25%. High yield corporates gained +0.73%, emerging markets +0.70% and MBS +0.83%.
Fixed income outlook from this week’s activity
We expect the Fed to remain on hold, with policymakers likely to lean patient given the softening labor backdrop. This week’s CPI and PPI reports will be critical in confirming or contradicting dovish repricing. We forecast the 10-year U.S. Treasury yield at 4.25% to 4.50% by year-end 2026.
Credit fundamentals remain broadly supportive, and we expect spread markets to stay constructive on continued earnings strength. We favor carrying high-quality income, with spread sectors offering attractive all-in yields.
Weekly fixed income performance snapshot
U.S. Treasuries
Treasuries rallied Friday on the payrolls miss, led by the front end in a bull-flattening move. Earlier steepness, driven by Fed credibility concerns and long-end supply, reversed as labor data took over. The Treasury’s quarterly refunding kept coupon auction sizes unchanged. Yields remain well above 10- and 20-year averages.
The 2-year yield fell 10 bps to 4.20%, the 5-year fell 10 bps to 4.35%, the 10-year fell 9 bps to 4.65%, the 20-year fell 8 bps to 5.21% and the 30-year fell 7 bps to 5.20%.
Tax-exempt municipals
Tax-exempt municipals posted positive returns, outperforming the broader Treasury rally. The sector continues to benefit from attractive income levels, and we maintain our view that higher starting yields reward patient investors willing to look past near-term volatility. August has historically been a positive month for municipal technicals and returns.
The Bloomberg Municipal Index returned +0.68%.
Taxable municipals
Taxable munis gained, aided by the rates rally and their longer-duration profile. Performance turned slightly positive year-to-date, with crossover investor demand persisting at elevated yields.
The Bloomberg Municipal Taxable Index returned +0.70% with spreads at 51 bps.
Investment grade corporates
Investment grade spreads tightened modestly as weaker payrolls reduced Fed rate hike expectations and supported risk appetite. Primary markets stayed active, absorbing heavy supply with most new issues trading tighter in the secondary market. Inflows slowed but demand held. Earlier rate backups continue to draw yield buyers.
The Bloomberg U.S. Corporate Bond Index returned +0.66% with spreads at 77 bps.
U.S. high yield corporates
High yield spreads tightened sharply on dovish rate repricing. New issuance surged as the market reopened. Fund flows turned strongly positive, the largest inflow in over a month and reversing recent outflows. Constructive technicals and solid earnings supported the move.
The Bloomberg High Yield 2% Issuer Capped Index returned +0.73% with spreads at 264 bps.
Preferred securities
Preferreds posted modest gains on the rates rally. Spreads widened slightly, reflecting rate-driven moves rather than credit improvement. Technicals remain supportive with limited near-term supply.
The ICE Preferred Index returned +0.25% with spreads at 158 bps.
Senior loans
Loans posted gains as refinancings and repricings dominated activity. Inflows were the strongest in months. Compressed spreads persisted amid ongoing supply/demand imbalance, and the floating-rate asset class stayed largely insulated from rate volatility.
The S&P Leveraged Loan Index returned +0.27% with spreads at 486 bps.
Securitized credit
Agency MBS rallied strongly on rate tailwinds. ABS issuance was robust across consumer and esoteric sectors with solid demand. CMBS gained modestly as secondary flows improved. CLO activity was heavy, with new issue and reset deals pricing across both broadly syndicated loans and middle-market collateral.
The Bloomberg MBS Index returned +0.83% with spreads at 26 bps. The Bloomberg CMBS Index returned +0.40% with spreads at 65 bps. The Bloomberg ABS Index returned +0.28% with spreads at 43 bps.
Global emerging markets
Emerging markets assets rallied as reduced hike expectations lifted currencies and local rates. Hard currency spreads widened slightly on lingering Middle East caution. Retail flows turned positive; new issuance remained subdued amid macro uncertainty.
The Bloomberg Global EM Index returned +0.79% with spreads at 162 bps.
U.S. Treasury market yields
| Maturity | Yield | Week | Month-to-date | Year-to-date |
|---|---|---|---|---|
| 2-year | 4.29 | -0.04 | 0.12 | 0.82 |
| 5-year | 4.45 | 0.02 | 0.22 | 0.72 |
| 10-year | 4.74 | 0.06 | 0.27 | 0.57 |
| 30-year | 5.27 | 0.12 | 0.32 | 0.43 |
| Source: Bloomberg L.P., 07 Aug 2026. Performance data shown represents past performance and does not predict or guarantee future results. | ||||
Unexpectedly weak July U.S. payrolls sparked a broad fixed income rally, sharply reducing September Fed rate hike expectations and reversing prior bear-steepening.
Fixed income investment characteristics and returns
| Index | Yield to worst (%) | Spread (bps) | Effective duration (years) | Returns (%) | ||
|---|---|---|---|---|---|---|
| Week | Month-to-date | Year-to-date | ||||
| U.S. Treasury | 4.50 | - | 5.77 | 0.47 | 0.47 | -0.37 |
| U.S. government related | 4.85 | 36¹ | 5.24 | 0.54 | 0.54 | 0.27 |
| Municipal | 3.83 | - | 6.69 | 0.68 | 0.68 | 1.11 |
| High yield municipal | 5.58 | 153² | 7.27 | 0.78 | 0.78 | 3.32 |
| Taxable municipal | 5.25 | 51¹ | 7.51 | 0.70 | 0.70 | 0.19 |
| U.S. aggregate bond | 4.90 | 27¹ | 5.90 | 0.60 | 0.60 | -0.09 |
| U.S. corporate investment grade | 5.38 | 77¹ | 6.66 | 0.66 | 0.66 | -0.18 |
| High yield 2% issuer capped | 7.18 | 264¹ | 2.94 | 0.73 | 0.73 | 2.44 |
| Preferred securities | 6.49 | 158¹ | 5.56 | 0.25 | 0.25 | 1.36 |
| Senior loans³ | 8.92 | 486 | 0.25 | 0.27 | 0.27 | 2.45 |
| U.S. mortgage-backed securities | 5.18 | 26¹ | 5.68 | 0.83 | 0.83 | 0.37 |
| U.S. commercial mortgage-backed securities | 4.99 | 65¹ | 3.69 | 0.40 | 0.40 | 0.79 |
| U.S. asset-backed securities | 4.72 | 43¹ | 3.01 | 0.28 | 0.28 | 1.24 |
| Collateralized loan obligations, AA | 5.23 | 131¹ | 0.25 | 0.12 | 0.12 | 3.14 |
| Collateralized loan obligations, BB | 11.88 | 763¹ | 0.25 | 0.27 | 0.27 | 3.09 |
| Global emerging markets | 6.15 | 162¹ | 5.83 | 0.79 | 0.79 | 1.49 |
| Global aggregate (unhedged) | 3.95 | 28¹ | 6.24 | 0.67 | 0.67 | -0.08 |
| 1 Option-adjusted spread to Treasuries. 2 Yield difference between the Bloomberg High Yield Municipal Index and the 20-year AAA MMD scale. 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, 07 Aug 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. |
||||||
Related articles
Contact us
You are on the site for: Financial Professionals and Individual Investors. You can switch to the site for: Institutional Investors or Global Investors
Representative indexes: U.S. Treasury: Bloomberg U.S. Treasury Index; U.S. government related: Bloomberg U.S. Government-Related Index; 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. corporate investment grade: Bloomberg U.S. Corporate Index; high yield 2% issuer capped: Bloomberg High Yield 2% Issuer Capped Index; preferred securities: ICE BofA U.S. All Capital Securities Index; senior loans: S&P UBS Leveraged Loan 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; 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 information does not constitute investment research as defined under MiFID.
Not registered yet? Register
You are about to access our website for visitors outside of the United States.
You are about to access our website for Nuveen Global Cities REIT
You are leaving the Nuveen website.
You are leaving the Nuveen website and going to the website of the MI 529 Advisor Plan, distributed by Nuveen Securities, LLC.The Nuveen website for institutional investors is available for you.
You are about to access our website for visitors outside of the United States.
You are about to access our website for Nuveen DMAT Cart
You are about to access our website for Nuveen Churchill Private Capital Income Fund (“NC - PCAP”)
