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Key takeaways
- The Fed held rates steady at 3.50% to 3.75%, citing elevated inflation tied to rising energy prices and Middle East uncertainty.
- Credit spreads continued to tighten, with investment grade corporate spreads compressing 10 bps for the month to 79 bps.
- Q1 U.S. GDP came in at 2.0%, accelerating meaningfully from Q4 and reinforcing the economy's resilience.
Market recap
The U.S. Federal Reserve held rates steady at its 29 April meeting, acknowledging elevated inflation driven partly by higher global energy prices and Middle East geopolitical uncertainty. The advance Q1 U.S. GDP estimate came in at 2.0%, a notable pickup from the prior quarter, while the labor market held steady with unemployment at 4.3%. Treasury yields edged higher across the curve, with the 10-year rising 7 basis points (bps) to 4.37%. New issuance remained active in investment grade, with over $30 billion pricing for the week and books averaging more than 3x oversubscribed.
Returns were mixed across fixed income. The Bloomberg U.S. Aggregate Bond Index returned -0.39% for the week. Senior loans outperformed at +0.12%, while investment grade corporates returned -0.45%. High yield corporates posted a modest gain of +0.05%, outperforming similar-duration Treasuries.
Outlook
Friday’s May jobs report will be the week’s key data point, with markets looking for confirmation that the labor market remains resilient. The ISM services report and JOLTS data earlier in the week should offer additional perspective on economic health, and the Treasury refunding announcement on Wednesday will draw attention as markets assess supply dynamics.
We expect the Fed to remain on pause through the summer as growth proves more resilient than anticipated but as inflation also stays sticky above target. We continue to see the 10-year Treasury yield trading in a 4.00% to 4.25% range, with spreads likely to remain well-supported by strong technicals and healthy fundamentals.
Weekly fixed income snapshot
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U.S. Treasuries |
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Yields rose modestly across the curve last week as markets digested a busy run of macro data. The Fed held rates steady at its 29 April meeting, acknowledging elevated inflation partly driven in part by rising global energy prices and flagging Middle East-related uncertainty in the outlook. The advance Q1 GDP estimate came in at 2.0%, a meaningful acceleration from the prior quarter that reinforced the view that the economy remains on solid footing despite tighter financial conditions. The curve steepened slightly, with the front end bearing the brunt of the selloff as markets repriced near-term rate expectations. Yields remain well above their 10- and 20-year historical averages, underscoring the structurally higher rate environment. |
The 2-year Treasury yield rose 10 bps to 3.88%, the 10-year rose 7 bps to 4.37%, and the 30-year rose 5 bps to 4.96%. |
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Tax-exempt municipals |
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Tax-exempt municipals logged the best April monthly return since 2014. The sector held up well despite the backup in Treasury yields, aided by strong demand and manageable supply. Investors are drawn to the sector’s high credit quality and tax-advantaged income potential. April returns pushed year-to-date performance back into positive territory, and we expect the sector will benefit from favorable supply-demand dynamics. |
The Bloomberg Municipal Index returned +1.15% in April. |
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Taxable municipals |
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Taxable municipals posted a small negative return in April, weighed down by rising Treasury yields given the sector’s longer duration profile. Despite the modest pullback, the broader tone remained constructive. Year-to-date performance still tracks ahead of taxable peers, and while valuations are tight, limited new issue supply continues to drive scarcity. |
The Bloomberg Municipal Taxable Index returned -0.24% in April with spreads at 54 bps. |
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Investment grade corporates |
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Investment grade corporates posted a positive return for the month as spread tightening more than offset the drag from higher Treasury yields. New issuance met solid demand, with all-in yields above 5% continuing to attract a broad buyer base. Corporate fundamentals remain supportive, underpinned by healthy balance sheets and constructive earnings. Further spread compression for the month reflected steady confidence in the economic outlook and durable appetite for high-quality credit. |
The Bloomberg U.S. Corporate Bond Index returned +0.45% in April with spreads at 79 bps. |
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U.S. high yield corporates |
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High yield posted a strong return for the month, driven by positive risk sentiment and robust demand for income. Technicals remain favorable, with primary supply manageable relative to investor appetite. Default expectations remain well-contained, and corporate earnings have broadly supported credit quality across the ratings spectrum. The sector’s shorter duration profile continues to attract investors seeking income with limited rate sensitivity. |
The Bloomberg High Yield 2% Issuer Capped Index returned +1.69% in April with spreads at 264 bps. |
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Preferred securities |
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Preferred securities delivered a strong return for the month, supported by tightening credit spreads and steady demand from income-oriented investors. Higher coupon income helped offset price pressure from rates, supply remained manageable and spreads compressed meaningfully over the period. |
The ICE BofA U.S. All Capital Securities Index returned +1.98% in April with spreads at 156 bps. |
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Senior loans |
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Senior loans delivered positive returns for the month, continuing to benefit from their floating-rate structure and strong demand. Near-zero duration insulates the asset class from rate volatility, making it attractive to investors seeking high current income with minimal duration risk. The default environment remains benign, and spreads tightened for the month as sentiment improved, though they remain wider year-to-date, reflecting earlier repricing of credit risk. |
The S&P Leveraged Loan Index returned +1.23% in April with spreads at 486 bps. |
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Securitized credit |
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Securitized sectors posted positive returns for the month, with spreads broadly stable across MBS, CMBS and ABS. Agency MBS benefited from steady demand from banks and money managers, and the prepayment environment remained favorable. CMBS continued to benefit from improving sentiment around commercial real estate fundamentals, though the office sector remains under scrutiny. ABS continues to offer stability and defensive characteristics, with spreads holding near long-term averages. Short duration, structural protections, and steady demand have kept the sector well-bid, making it one of the more consistent risk-adjusted performers year-to-date. |
The Bloomberg U.S. Mortgage-Backed Securities Index returned +0.07% in April with spreads at 19 bps. The Bloomberg CMBS ERISA-Eligible Index returned +0.18% with spreads at 67 bps. The Bloomberg Asset-Backed Securities Index returned +0.29% with spreads at 49 bps. |
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Global emerging markets |
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Emerging markets debt posted a positive return for the month as spread tightening and carry more than offset the drag from higher U.S. Treasury yields. Flows remained broadly constructive, with higher-quality sovereigns attracting the bulk of demand. Improving sentiment around the macro backdrop has drawn investors back to the sector for its attractive yield, and technicals remain supportive as steady inflows and manageable new issuance keep supply-demand dynamics favorable. U.S. monetary policy and dollar direction remain the key drivers going forward. |
The Bloomberg Global Aggregate Unhedged Index returned +2.11% in April with spreads at 171 bps. |
U.S. Treasury market yields
| Maturity | Yield | Week | April 2026 | Year-to-date |
|---|---|---|---|---|
| 2-year | 3.88 | 0.10 | 0.08 | 0.41 |
| 5-year | 4.02 | 0.10 | 0.06 | 0.29 |
| 10-year | 4.37 | 0.07 | 0.05 | 0.20 |
| 30-year | 4.96 | 0.05 | 0.05 | 0.12 |
| Source: Bloomberg L.P., 01 May 2026. Performance data shown represents past performance and does not predict or guarantee future results. | ||||
Yields moved modestly higher, but strong fundamentals and robust demand kept credit spreads tightening across fixed income sectors.
Fixed income characteristics and returns
| Index | Yield to worst (%) | Spread (bps) | Effective duration (years) | Returns (%) | ||
|---|---|---|---|---|---|---|
| Week | April 2026 | Year-to-date | ||||
| U.S. Treasury | 4.21 | - | 5.87 | -0.39 | -0.07 | -0.04 |
| U.S. government related | 4.57 | 36¹ | 5.35 | -0.24 | 0.43 | 0.43 |
| Municipal | 3.68 | - | 6.67 | -0.33 | 1.15 | 0.98 |
| High yield municipal | 5.56 | 161² | 7.31 | -0.21 | 1.36 | 2.13 |
| Taxable municipal | 5.02 | 54¹ | 7.58 | -0.47 | -0.24 | 0.34 |
| U.S. aggregate bond | 4.61 | 26¹ | 5.93 | -0.39 | 0.11 | 0.18 |
| U.S. corporate investment grade | 5.13 | 79¹ | 6.85 | -0.45 | 0.45 | 0.06 |
| High yield 2% issuer capped | 6.94 | 264¹ | 2.92 | 0.05 | 1.69 | 1.33 |
| Preferred securities | 6.25 | 156¹ | 5.60 | -0.18 | 1.98 | 1.38 |
| Senior loans³ | 8.55 | 486 | 0.25 | 0.12 | 1.23 | 0.76 |
| U.S. mortgage-backed securities | 4.86 | 19¹ | 5.42 | -0.39 | 0.07 | 0.63 |
| U.S. commercial mortgage-backed securities | 4.70 | 67¹ | 3.78 | -0.27 | 0.18 | 0.55 |
| U.S. asset-backed securities | 4.45 | 49¹ | 2.81 | -0.10 | 0.29 | 0.65 |
| Collateralized loan obligations, AA | 5.10 | 139¹ | 0.25 | 0.17 | 0.70 | 1.71 |
| Collateralized loan obligations, BB | 11.54 | 760¹ | 0.25 | 1.42 | 3.89 | 0.64 |
| Global emerging markets | 6.00 | 171¹ | 5.96 | -0.11 | 2.11 | 0.91 |
| Global aggregate (unhedged) | 3.79 | 28¹ | 6.30 | 0.07 | 1.25 | 0.36 |
| 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, 01 May 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: 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 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.
