Fed Chair Powell’s oil shock comments, resilient economic data, and war-driven spread widening headline this week’s fixed income commentary for the week of April 2, 2026.
Economic Commentary
- Fed Chair Powell said it is appropriate to look through an oil shock, but only up to a point — without specifying where that point lies. Odds of a rate hike this year, which had been around 25% earlier in the week, have now dropped close to zero.
- New York Fed President John Williams told an audience he expects the war will boost inflation in the short term but still anticipates inflation falling back to 2.75% by year-end — a scenario that could open the door to rate cuts.
- JOLTS job openings fell to 6.882 million, as expected. The hiring rate dropped to 3.0, the lowest since 2020, though the job openings rate held steady at 4.2 — the middle of its range going back to mid-2024.
- Consumer confidence came in at 91.8, up from a revised 91.0 last month and above the 87.9 estimate. Expectations have not yet been dented by higher energy prices.
- ADP reported 62k new private sector jobs added in February, beating the 40k consensus. Small companies, which struggled late last year, accounted for all net job creation in both February and March.
- Retail sales rose 0.6% in February, revised from -0.2% to -0.1% in January. Excluding autos and gasoline, sales rose 0.4%. The control group rose 0.5% versus a 0.3% consensus — a net beat of three tenths when accounting for the January revision.
- The March ISM Manufacturing Index rose from 52.4 to 52.7, the highest since August 2022. New orders fell from 55.8 to 53.5, but production and supplier deliveries rose to 55.1 and 58.9, respectively. The prices paid component jumped from 70.5 to 78.3, above estimates, despite several respondents noting some tariff-related price relief following court decisions in late February.
- The Atlanta Fed GDPNow was revised down from 2.1% to 1.64%, mostly on a downward revision to consumption.
Our Take
Recent economic data has held up reasonably well, but does not yet incorporate the higher energy, transportation, fertilizer, and other costs incurred since the start of the war. Even the upcoming Q1 earnings season may be too early to gauge the full potential impact. How long the conflict lasts — and how quickly elevated prices moderate — will determine whether this proves to be a shock markets and the Fed can look past, or whether it will leave a more lasting mark on the economy. US Treasuries have begun to pivot from inflation concerns toward growth concerns, but this shift could have further to run if hostilities persist.
Corporate Bond Market Commentary
Investment Grade (IG) Bonds
- IG spreads widened 3bp to +91bp; total returns were -0.25%.
- IG new issue supply was $29.4 billion across 22 issuers. New issue concessions were 4.2bp, books were 3.8x covered, attrition was 20%, and deals tightened 29bp on average from IPT to final pricing. This week’s volume is only $8 billion; April supply estimates average $112.3 billion.
- IG fund flows were +$2.9 billion last week. However, the current week saw an outflow of $5.35 billion — the first weekly outflow since April of last year.
High Yield (HY) Bonds
- HY spreads widened 18bp to +342bp; total returns were -0.49% (BBs -0.52%, Bs -0.34%, CCCs -0.75%).
- HY new issuance was $10.49 billion, with large M&A-driven deals from Nexstar and Electronic Arts accounting for the full total.
- HY fund flows were -$2.0 billion; leveraged loans saw +$46 million of inflows.
Our Take
The drawdown in corporate bonds is almost entirely macro-driven — higher rates along with elevated energy, fertilizer, helium, and transportation costs. Corporate fundamentals in many sectors were in good shape heading into this period; how long elevated costs persist will determine whether issuers emerge unscathed or seriously impaired. The first weekly outflow from IG funds in over a year suggests technical conditions may also be starting to deteriorate.
Municipal Bond Market Commentary
- Municipal bond returns were *
