Fixed income market outlook
Recent market conditions have significantly impacted bond prices, with several key factors influencing the fixed income landscape as of January 2025:
Interest rate environment: The Federal Reserve has transitioned from rate hikes to a cycle of rate cuts, having reduced the federal funds rate by 100 basis points since September 2024. The current target range is set at 4.25%-4.50%.
Higher yields: Treasury bonds, investment-grade credit, and high-yield corporates are offering attractive yields. Various fixed income sectors, including Treasuries, MBS, investment grade and high yield corporates, and emerging markets, have seen positive performance recently. The municipal bond market continues to enjoy strong fundamentals, with yields declining and new issues being well-received. The 10-year Treasury yield has been volatile, ranging between 3.5% and 5.0%. As of late January 2025, yields have trended higher, with the 10-year Treasury yield rising by 40 basis points in December 2024 alone.
Econo…