Rising Treasury yields, persistent inflation concerns, and resilient credit markets define this week’s fixed income landscape. Here is our analysis of economic conditions, corporate bonds, and municipal markets for the week of June 11th, 2026.
Economic Commentary
- Last week’s comments from Fed officials ahead of the blackout period for the June meeting skewed more hawkishly, taking the JP Morgan Hawk Dove Score Index (HDSI) to its highest level in over a year.
- The CPI rose 0.473% in May after rising 0.640% in April. The core rose 0.208% in May after rising 0.376% in April. The April core was boosted by the missing October rent survey being replaced with an actual rent survey in April. Year-on-year, the CPI rose 4.167% in May, up from 3.779%, and the core rose 2.823%, up from 2.743%. This is the largest increase in headline inflation since April 2023.
- Nonfarm payrolls rose 172k in May, easily topping the 88k consensus. March and April were revised up 93k, with March revised up 29k to 214k and April revised up to 64k to 179k.
- Average hourly earnings rose 0.3% in May, as expected. Year-on-year average hourly earnings growth was 3.4%, down from 3.6% in April.
- Aggregate hours worked rose just 0.1%, and the year-over-year average hourly earnings growth was the second lowest since 2021.
- May PPI rose 1.1% headline and 0.8% core. The monthly increases for headline and core both printed four tenths above the consensus estimate, bringing the annual increases to 6.5% and 5.1%, respectively. That said, the headline numbers in May look worse because of downward revisions to April data.
Our Take
Next week’s FOMC meeting will be the first for new Chair Kevin Warsh, and the timing is interesting. Recent economic data indicates a labor market that is at least stable if not improving, while inflation data worsens. At a minimum, most market participants expect removal of the easing bias from the FOMC statement. How Warsh is able to herd all the cats will make for an interesting first press conference.
Corporate Bond Market Commentary
- Investment grade bond spreads were 1bp wider to +74bp, and total returns were -0.55%.
- IG bond issuance was $50.4 billion last week across 32 issuers. NICs were 1.3bp, books were 3.8x covered, attrition was 18% and deals tightened 24bp on average from IPT to final pricing.
- IG fund flows were +$3.77 billion.
- High yield bond spreads were 4bp wider to +276bp and total returns were -0.37% (BBs -0.35%, Bs -0.40%, CCCs -0.40%).
- HY bond issuance was $13 billion last week, including deals from Goodyear, Venture Global, Whirlpool, Outfront Media, B&G Foods, and QXO Building Products.
- HY fund flows were +$881.8 million and leveraged loan inflows were +$756 million.
- HY dealers were net hit on $500 million, pushing their net long position to $5.1 billion, the highest since November 2021.
Our Take
We are essentially through the end of Q1 earnings season, and credit quality remains generally solid, but pockets of weakness and dislocation exist in sectors such as building products, packaging, software, trucking, and others. We expect dispersion to increase going forward as higher energy, transportation, feedstock, and other costs have now been elevated for over three months and weigh on stressed borrowers more. This should offer additional opportunities for credit picking in the months ahead.
Municipal Bond Market Commentary
- The municipal bond index returned +0.18% last week.
- Muni yields were -5, 3, -5, and -8, and ratios were -3%, -3%, -3%, and -2% to 61%, 59%, 64%, and 84% at 1, 5, 10, and 30 years respectively.
- Municipal new issue supply was $20.3 billion, a 52-week high. This week’s calendar is $13.7 billion, including $13.0 billion tax-exempt.
- Fund flows were +$2.784 billion, including $817 million into mutual funds and $1.967 billion into ETFs. This is the seventh consecutive week of > $1 billion ETF inflows.
Our Take
Municipal bonds outperformed Treasuries last week in spite of a massive $20.3 billion new issuance. Fund flows continue to consistently chug along, paired up with seasonally favorable principal and interest reinvestment dollars. Muni bonds do not fall under the ‘sell in May and go away’ mantra, as the supply / demand setup looks favorable.
Important Information
Investors should consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. The prospectus contains this and other information about a fund. To obtain a prospectus, visit sheltoncap.com or call (800) 955-9988. A prospectus should be read carefully before investing.
It is possible to lose money by investing in a fund. Past performance does not guarantee future results. Any projections or other forward-looking statements regarding future events or the performance of markets, companies, or otherwise are not necessarily indicative of, and may differ from, actual events or results.
INVESTMENTS ARE NOT FDIC INSURED OR BANK GUARANTEED AND MAY LOSE VALUE.
