Executive Summary
- Treasury Markets: Yields plummeted by 22-25 bp across the curve as investors welcomed news of Trump’s perceived market-friendly Treasury Secretary nominee, Scott Bessent. The 2Y yield slid 10 bp lower DoD on the announcement—the largest daily move since September’s nonfarm payrolls print (+22 bp)—and finished the week 22 bp lower at 4.15%. Similarly, the 10Y fell 13 bp DoD on Monday—the largest daily move since the day after the US presidential election (+16 bp)—and ended the week 23 bp lower at 4.17%. Headline and core PCE held steady on a MoM basis at +0.2% and +0.3%, respectively, while YoY figures aligned with an anticipated acceleration to +2.3% headline and +2.8% core. Despite being viewed by many investors as merely a starting point in bilateral trade and immigration negotiations, new developments around Trump’s proposed tariff policies continued to stoke reflation concerns. Even amid the market repricing to a shallower path of rate cuts in 2025, we think risks are skewed to the upside in terms of the Fed funds rate at YE25 and Treasury yields in the medium term.
- Credit Markets: Credit spreads widened by 2 bp to 82 bp in IG and 11 bp to 272 bp in HY as risk sentiment softened slightly on escalating tariff proposals. The exuberant rates rally more than offset the spread widening, sending IG yields 19 bp lower to 5.06% and HY yields 9 bp lower to 7.13%, both around mid-October levels. Though IG weekly excess returns were a wash at -0.10%, total returns notched a significant +1.47% gain, outperforming the +0.41% total return in HY. Across both IG and HY, spread widening was driven by lower-rated tranches and the long-end as investors retreated up the rating spectrum and into the front-end of the curve. The entire AAA-A complex widened just 1 bp compared to BBBs (+2 bp) and BBs and Bs similarly widened just 9-11 bp while CCCs widened 16 bp. In IG, the front-end remained flat on the week, with incremental spread widening out the curve. HY curve performance was more uniform, with 12-13 bp of spread widening past the front-end, which outperformed with just 5 bp of spread widening.
- Municipal Markets: Boosted by the strong move by Treasuries, tax-exempt yields fell last week, but by a smaller magnitude. For example, in 10-years, the UST yield dropped by 23 bp as the BVAL AAA yield ended 12 bp lower. Due to the underperformance relative to Treasuries, excess returns for the tax-exempt indices were negative and muni/Treasury yield ratios inched upwards (munis cheaper), although ratios were well below the 90-day averages. This week’s new issue calendar totals $15.3 bn, of which $12.0 bn is tax-exempt, $1.7 bn is subject to the AMT, and $1.4 bn is taxable; notable deals include a $1.5 bn New Jersey deal, $750 mn taxable Hawaii GO bonds, Orlando airport and more.
- Equity Markets: The equity rally extended over the week, with the S&P 500 and DJIA both advancing to record closes twice on Tuesday and Friday and the Nasdaq nearing its all-time high set a few weeks ago. Weekly performance was similar across the three major indices, with the S&P 500 (+1.1%) and Nasdaq (+1.1%) following closely behind the DJIA (+1.4%). While the Russell 2000 (+1.2%) fell in the middle of the pack last week, the rotation into small caps boosted November performance to +11.0%, well above the ~6-8% monthly return range for the three major indices. After hitting an intraday peak of 15.72 on Monday, volatility trended lower over the week to close at 13.51, 20% lower WoW.
- Commodity Markets: Metal prices were mixed during the shortened holiday week. Crude prices fell this week as the market awaits upcoming production plans from OPEC+ and digests the ceasefire between Israel and Hezbollah. WTI and Brent decreased 3% to $68.00/bbl and 2% to $72.94/bbl, respectively, on the week.
- Fund Flows: For the calendar week, fixed income ETFs pulled in $3.6 bn, down 60% from the week before, due mostly to outflows from UST and IG corporate bond ETFs. November flows IG and HY corporate and muni ETFs were up MoM as net flows into agg ETFs slowed (but were still strongly positive) while UST ETFs lost assets.
Relative Value
Treasury Markets:
Credit Markets:
Municipal Markets:
- Municipal Markets: Boosted by the strong move by Treasuries, tax-exempt yields fell last week, but by a smaller magnitude. For example, in 10-years, the UST yield dropped by 23 bp as the BVAL AAA yield ended 12 bp lower. Due to the underperformance relative to Treasuries, excess returns for the tax-exempt indices were negative and muni/Treasury yield ratios inched upwards (munis cheaper), although ratios were well below the 90-day averages.
- For the week, the ICE Muni Index returned 0.84%; for the month of November it earned 1.63%, the best month of the year and the best performance since December 2023.
- For the week ended Wednesday, net flows into muni mutual funds fell to $41 mn, from $572 in the prior week, but we do not necessarily view the significant slowdown as an indicator of reduced demand.
- For the calendar week, muni ETFs added $868 mn of net new assets, which was down just 4% from the week before; for the month of November, muni ETFs added $3.5 bn, up 7% from October, the 9th consecutive month of positive flows and a 12-month-high.
- This week’s new issue calendar totals $15.3 bn, of which $12.0 bn is tax-exempt, $1.7 bn is subject to the AMT, and $1.4 bn is taxable; notable deals include a $1.5 bn New Jersey deal, $750 mn taxable Hawaii GO bonds, Orlando airport and more.
- For additional details on municipal bond market tax-exempt and taxable yields and spreads see Muni Catch Up for the First Week of December.
Equity Markets:
Commodity Markets:
Fund Flows:
Money Market Fund Flows
Long-Term Mutual Fund & ETF Flows for the Week Ended Wednesday, November 26
ETF Activity for the Calendar Week Ended on Friday, November 29
Fixed income ETFs pulled in $3.6 bn, down 60% from the week before, due mostly to the outflows from UST and IG corporate bond ETFs.
- Agg ETFs added $1.3 bn, down by half from the week before and about half of the 13-week average of $2.4 bn, but it was the 22nd consecutive week of positive net flows.
- UST ETFs lost $2.0 bn, after gaining $705 mn in the prior week.
- IG ETFs lost $120 mn, after collecting $1.9 bn in the prior week.
- HY corporate ETFs pulled in $869 mn, down 9% from the week before.
- US equity ETFs added $21.7 bn, up 2% from the prior week and 34% more than the 13-week average.
Our archive of fixed income ETF reports is available on the ETF Home Page.
For more about how we compile mutual fund and ETF flows please see Spotlight on Fund Flow Reporting – An Update.
