Strong retail sales, Kevin Warsh’s Senate testimony, and a record week of bank-driven IG issuance headline this week’s fixed income commentary for the week of April 23, 2026.
Economic Commentary
- Retail sales control group rose 0.72% in March; February was revised up from 0.45% to 0.64%; three-month annualized growth accelerated to 4.76% from 3.14% in February and 2.76% in December. Deflated using CPI ex-autos, the control series increased 4.08% in Q1 2026 versus 2.64% in Q4 2025. The net takeaway: a surge in tax refunds, a lower effective tariff rate, and fading effects of slower immigration and government spending growth drove stronger retail sales in Q1 despite the spike in gasoline prices.
- Kevin Warsh testified before the Senate Banking Committee Tuesday largely as expected. He said the Fed overcommunicates via the SEP and other public commentary, the balance sheet should be smaller, and the Fed “must take responsibility” for inflation. His characterization of the economy and monetary policy read as broadly hawkish — he noted the unemployment rate shows a fine labor market despite zero job growth, that Fed independence depends on its credibility in fighting inflation, and that one-off tariff pass-through does not explain currently elevated inflation.
- Warsh’s praise of trimmed-mean inflation previewed a path to rate cuts. Trimmed-mean PCE strips out product categories with the largest monthly price swings to better reflect underlying inflation trends. It has been running at 2.0% annualized over the past six months, versus 3.4% for the traditional PCE price index.
- The Philly Fed service sector diffusion index came in at a contractionary -16.5 for April — only marginally better than the woeful -23.9 in March. New orders cratered to -16.9 from -4.7, a three-year low.
- The S&P Global flash composite PMI rose to a three-month high of 52. Selling prices jumped to 59.9, the highest since July 2022, and input prices rose from 60.9 to 62.6, while new orders ticked slightly lower from 51.0 to 50.9.
Our Take
Recent economic data shows broad-based strength — retail sales, manufacturing PMIs, and composite PMIs among them. Earnings and outlooks from industrial companies are largely echoing that positivity. However, it remains unclear how much was driven by larger tax refunds under the OBBBA, inventory restocking, and other one-time tailwinds — particularly if the conflict in the Middle East keeps energy, helium, fertilizer, and other prices elevated for longer. Interest rates may remain range-bound until more clarity on these factors emerges.
Corporate Bond Market Commentary
Investment Grade (IG) Bonds
- IG spreads tightened 2bp to +80bp; total returns were +0.67%.
- IG new issuance was $57.6 billion across 21 borrowers, well above the $40 billion estimate. Roughly 95% of volume came from financials — primarily major banks following their earnings releases. Books were 3.7x covered, NICs were 3.4bp, attrition was 23%, and deals tightened 28bp on average from initial price talk to final pricing.
- Supply estimates for the coming week are more moderate at $20–25 billion.
- IG fund flows were +$85 million.
High Yield (HY) Bonds
- HY spreads tightened 11bp to +283bp; total returns were +0.68% (BBs +0.51%, Bs +0.78%, CCCs +1.47%).
- HY new issuance was $15.025 billion — the largest week since September 2025 — with deals from CoreWeave, Herbalife, Sotheby’s, NRG Energy, Lifepoint Health, TransDigm, and Meridian Arc Holdco.
- HY fund flows were +$2.8 billion; leveraged loan flows were +$398 million.
Our Take
Corporate bond performance remained solid alongside broader risk-on sentiment, despite the ongoing conflict. Early earnings this cycle are generally coming in well, with notable exceptions in sectors directly exposed to war-related disruptions. With spreads back near pre-conflict levels despite no resolution in sight, further bouts of volatility are possible, and better entry points for adding risk may emerge in the days and weeks ahead.
Municipal Bond Market Commentary
- The municipal bond index returned +0.23% last week and is now +1.12% year-to-date.
- Muni yields fell -1, -3, -5, and -4bps at the 1-, 5-, 10-, and 30-year maturities; ratios moved to 62%, 62%, 67%, and 87% at those same tenors.
- Muni fund flows were -$675 million, with $633 million in mutual fund outflows and $42 million in ETF outflows.
- Last week’s new issue volume was $17.9 billion ($12 billion tax-exempt, $4.2 billion taxable, $1.1 billion AMT).
- This week’s new issue calendar is $13 billion ($12 billion tax-exempt).
Our Take
Tax-related outflows from municipal bonds were expected, and the large new issue calendars have been reasonably well absorbed. With tax season now behind us and the calendar turning toward months with greater principal and interest reinvestment flows, the technical backdrop for municipals is improving.
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