Executive Summary

Rates fell in a modest bull steepener as softer labor and confidence reinforced caution during the shutdown. With payrolls delayed, markets leaned on alternative labor and sentiment indicators showing cooling.

Credit was resilient, with limited spread moves and positive total returns from the rates rally. IG was steady across buckets, while HY underperformed at the long end and lower tiers but still benefited from carry.

Munis had supportive technicals: net buying, steady mutual fund and ETF inflows, and robust primary activity. Curves flattened slightly, ratios stayed reasonable, and taxable munis outpaced comparable broad fixed income indices.

Equities advanced to fresh highs on expectations for further policy support, favorable seasonal factors, and solid earnings narratives. Leadership remains concentrated, with small caps participating and volatility ticking higher, prompting debate about the durability of the current momentum.

Commodities were mixed. Metals extended their grind higher on supply dynamics, while crude weakened on reduced geopolitical risk premia and potential supply increases. 

Fund flows were constructive. Fixed income ETFs saw firm net inflows across segments, highlighted by strong high yield demand and continued interest in munis, MBS, and CLOs.