April’s inflation data, stronger-than-expected retail sales, and resilient corporate bond markets highlight this week’s fixed income commentary for the week of May 14, 2026.
Economic Commentary
The headline CPI rose 0.6%, as expected, boosted by a 5.6% increase in energy commodities. The slight upside miss in core CPI stemmed from a rise in shelter prices tied to data collection issues during the Q4 government shutdown. Accounting for this statistical distortion, core CPI ex-shelter was benign.
- PPI rose 1.4% in April — nearly three times the 0.5% expected and the biggest monthly increase since a 1.7% rise in March 2022. PPI rose 1.0% ex-food and energy; core PPI rose 0.6%. Components feeding into PCE were mostly tamer than in the CPI, as airfares rose 1.0% (vs. 2.8% in CPI) and financial services fell 2.4% (vs. +8.5% in CPI).
- Year-over-year retail sales growth accelerated to 4.9%, the fastest since August 2025. Three-month annualized retail sales growth of 9.0% is the fastest since a double-digit rise in June 2022.
- April payrolls posted their first back-to-back increase since last May, with both March and April showing triple-digit gains. A 115k rise in payrolls is roughly half the historical average monthly gain, but relative to recent years these numbers are strong. The four-month average rose to 76k, the highest since January 2025.
- The household survey told a very different story — even as establishments reported decent job growth, households continued to report job losses and a further increase in discouraged workers leaving the labor force.
- Average hourly earnings (AHE) rose 0.2% in April and were revised down from 0.3% to 0.2% in March. Year-on-year AHE growth rose from 3.43% to 3.57%.
Our Take
The April retail sales gain was impressive but appears unsustainable. According to FHN, after a 14.4% rise in three-month-on-three-month retail sales growth in June 2022, sales fell in two of the next three months and the annualized growth rate dropped to -0.24% by September. Now that real income growth is negative year-on-year, slower spending may be coming in the months ahead. In March, gasoline sales rose by about as much as prices rose. In April, gasoline sales rose less than prices did — suggesting people are driving less and turning to carpooling or public transit. These may be the first signals of spending changes in the face of high fuel prices. In coming months, those cuts could extend beyond the gas pump to other areas of consumer spending, particularly for lower- and middle-income households. As long as asset prices remain near all-time highs, wealthier households that own financial assets could continue to power the consumer economy.
Corporate Bond Market Commentary
Investment Grade (IG) Bonds
- IG spreads tightened 2bp to +79bp; total returns were +0.35%.
- IG new issue supply was $37.1 billion, slightly below the $40 billion estimate. Books were 5x covered, attrition was stable at 20%, NICs were only 1.5bp, and deals tightened 31bp on average from initial price talk to final pricing.
- IG fund flows were +$6.9 billion.
High Yield (HY) Bonds
- HY spreads widened 4bp to +281bp; total returns were +0.05% (BBs +0.06%, Bs +0.12%, CCCs -0.30%).
- HY new issue supply was $13 billion across 18 deals — the greatest number of deals in a single week since September — including BASF Coatings, Venetian Las Vegas, Hilton, Harvest Midstream, Alaska Airlines, Level 3, PODS, Owens-Brockway, and Academy Sports.
- HY fund flows were +$643 million; leveraged loan funds saw +$844 million in inflows.
Our Take
Corporate bond markets continue to be fairly resilient in the face of rising US Treasury and sovereign bond yields. Spreads are tight, aided by attractive all-in yields and a risk-on equity market. We are mostly through earnings season — aside from retailers and late-reporting HY issuers — and while certain sectors such as building products, software, and some chemicals and packaging sub-sectors are getting hit hard, overall performance has been resilient. Whether corporate credit can carry on may depend on consumer resilience amid ongoing cost pressures, or easing in broader geopolitical uncertainty.
Municipal Bond Market Commentary
- The municipal bond index returned +0.20% last week.
- Muni yields moved -1, -1, -2, and -1bps at the 1-, 5-, 10-, and 30-year maturities; ratios were 64%, 62%, 66%, and 87% at those same tenors.
- Last week’s new issue volume was $15 billion ($13 billion tax-exempt). This week’s calendar is $13.8 billion ($11.3 billion tax-exempt).
- Muni fund flows were +$3.102 billion, including $1.192 billion into mutual funds and $1.910 billion into ETFs.
Our Take
Strong muni fund flows supported the market even in the face of a challenging rates environment and somewhat elevated new issue supply. Tax season is now behind us, and better principal and interest reinvestment periods lie ahead. With all-in muni yields at levels that are typically enticing to retail investors, this combination of factors should set municipals up favorably in the weeks ahead.
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