- Fixed income returns were broadly positive in August as the Bloomberg U.S. Aggregate Index (the Agg) gained 1.20%. Year-to-date, the Agg has returned 4.99%.
- High yield corporates led performance across the major fixed income categories during the month, with notable strength in lower-rated CCC bonds. CCCs benefited from spread tightening. In contrast, spreads across investment grade and higher-rated high yield categories (BB/B) were flat to modestly wider.
- Within the Agg’s sub-sectors, mortgage-backed securities were the top-performer in both absolute and excess return terms, while intermediate and long corporates posted the weakest excess returns.
- Treasury yields declined across the short and intermediate parts of the curve, while the 30-year yield rose slightly, resulting in a curve steepening. Treasuries posted positive returns overall, though long-duration Treasury bonds lagged.
- High yield corporate bond spreads were mixed, but returns were positive across all high yield ratings categories in both absolute and excess terms.
Market Summary
Performance was positive across all the major fixed income categories in August, led by high yield corporates.
YIELDS & RETURNS (%) 1
| Duration (years) | Yield | August Return | YTD Return | |
|---|---|---|---|---|
| Treasuries | 5.87 | 3.97 | 1.06 | 4.48 |
| Investment Grade Corporates | 6.89 | 4.91 | 1.01 | 5.30 |
| High Yield Corporates | 3.14 | 6.75 | 1.25 | 6.35 |
| Municipal Bonds | 6.80 | 3.89 | 0.87 | 0.32 |
U.S. Treasury Market
The Treasury curve steepened in the month as yields fell on the short and intermediate part of the curve while rising slightly on the long end.
TREASURY YIELDS (%) 1
| August Change | Year-to-Date Change | 2025-08-31 | 2025-07-31 | 2025-06-30 | 2025-05-31 | |
|---|---|---|---|---|---|---|
| 90-Day T-Bills | -0.20 | -0.18 | 4.14 | 4.34 | 4.29 | 4.34 |
| 2-year Treasury | -0.33 | -0.64 | 3.61 | 3.94 | 3.72 | 3.89 |
| 5-year Treasury | -0.27 | -0.70 | 3.69 | 3.96 | 3.79 | 3.95 |
| 10-year Treasury | -0.14 | -0.35 | 4.22 | 4.36 | 4.23 | 4.39 |
| 30-year Treasury | 0.03 | 0.14 | 4.92 | 4.89 | 4.78 | 4.91 |
Performance was positive for all but the longest Treasuries. The strongest performance came in the 5- to 10-year segments.
TREASURY RETURNS (%) 1
| Duration (years) | August Return | YTD Return | |
|---|---|---|---|
| 90-Day T-Bills | 0.24 | 0.40 | 2.86 |
| 2-year Treasury | 1.94 | 0.88 | 3.51 |
| 5-year Treasury | 4.61 | 1.52 | 5.92 |
| 10-year Treasury | 8.21 | 1.58 | 6.00 |
| 30-year Treasury | 16.05 | -0.10 | 0.73 |
| U.S. Treasury TIPS | 6.59 | 1.54 | 6.41 |
Broad Investment Grade
The Bloomberg Barclays Aggregate Index delivered positive absolute and excess returns, with mortgage-backed securities leading performance across both metrics. In contrast, corporate bonds posted negative excess returns.
INVESTMENT GRADE INDEX & SECTOR RETURNS (%) 1
| Duration (years) | Yield | August Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| U.S. Aggregate | 6.03 | 4.44 | 1.20 | 0.11 | 4.99 | 0.37 |
| Treasuries | 5.87 | 3.97 | 1.06 | 0.00 | 4.48 | 0.00 |
| Agencies | 3.57 | 4.13 | 1.01 | 0.04 | 4.37 | 0.20 |
| Mortgage-Backed Securities | 5.76 | 4.86 | 1.61 | 0.47 | 5.48 | 0.59 |
| Asset-Backed Securities | 2.68 | 4.23 | 0.96 | 0.05 | 4.05 | 0.27 |
| Intermediate Corporates | 4.16 | 4.53 | 1.18 | -0.11 | 5.81 | 0.77 |
| Long Corporates | 12.75 | 5.74 | 0.67 | -0.01 | 4.26 | 0.71 |
Corporate bond spreads widened month-over-month in the short and intermediate segments of the market, while remaining unchanged for long-duration bonds.
INVESTMENT GRADE SPREADS (basis points) 1
| August Change | Year-to-Date Change | 2025-08-31 | 2025-07-31 | 2025-06-30 | 2025-05-31 | |
|---|---|---|---|---|---|---|
| 1-3 Yr Corporates | 3 | -2 | 50 | 47 | 52 | 57 |
| Intermediate Corporates | 4 | 1 | 72 | 68 | 75 | 80 |
| Long Corporates | 0 | -4 | 94 | 94 | 100 | 106 |
| MBS Current Coupon Spread | -16 | -14 | 110 | 126 | 125 | 134 |
All corporate bond ratings categories were positive in absolute terms, while all but AAAs posted negative excess returns.
INVESTMENT GRADE CORPORATE CREDIT QUALITY RETURNS (%) 1
| Duration (years) | Yield | August Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| AAA | 10.30 | 4.76 | 0.79 | 0.02 | 4.11 | 0.32 |
| AA | 7.74 | 4.65 | 0.88 | -0.06 | 4.56 | 0.45 |
| A | 6.89 | 4.78 | 1.00 | -0.09 | 5.32 | 0.78 |
| BBB | 6.68 | 5.08 | 1.05 | -0.07 | 5.43 | 0.73 |
Investment grade corporate bond spreads were flat to moderately wider across all sectors.
INVESTMENT GRADE CORPORATE BOND SPREADS BY SECTOR (basis points) 1
| August Change | YTD Change | 2025-08-31 | 2025-07-31 | 2025-06-30 | 2025-05-31 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | 3 | -2 | 72 | 69 | 74 | 76 |
| Technology | 3 | 2 | 66 | 63 | 67 | 69 |
| Energy | 3 | 4 | 96 | 93 | 101 | 109 |
| Consumer Cyclical | 2 | 6 | 77 | 75 | 84 | 89 |
| Transportation | 0 | 1 | 76 | 76 | 82 | 87 |
| Basic Industry | 2 | -4 | 88 | 86 | 93 | 100 |
| Communications | 4 | -7 | 90 | 86 | 92 | 102 |
| Capital Goods | 3 | -5 | 67 | 64 | 71 | 74 |
| Utilities | 2 | 3 | 86 | 84 | 93 | 97 |
| Financials | 3 | -3 | 80 | 77 | 85 | 90 |
High Yield
High yield returns were strong for all ratings categories, led by the lowest-quality CCCs. Spreads tightened on CCCs while widening by 1 basis point on BBs and Bs.
HIGH YIELD SECTOR RETURNS (%) 1
| Duration (years) | Yield | August Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| High Yield Corporates | 3.14 | 6.75 | 1.25 | 0.20 | 6.35 | 1.88 |
| BB | 3.39 | 5.74 | 1.27 | 0.17 | 6.52 | 1.94 |
| B | 2.87 | 6.71 | 1.11 | 0.11 | 5.88 | 1.54 |
| CCC | 2.86 | 10.08 | 1.86 | 0.86 | 7.03 | 2.64 |
HIGH YIELD OPTION-ADJUSTED SPREADS (OAS) (basis points) 1
| August Change | YTD Change | 2025-08-31 | 2025-07-31 | 2025-06-30 | 2025-05-31 | |
|---|---|---|---|---|---|---|
| High Yield OAS | -6 | -15 | 272 | 278 | 290 | 315 |
| BB OAS | 1 | -9 | 170 | 169 | 171 | 191 |
| B OAS | 1 | -11 | 266 | 265 | 281 | 301 |
| CCC OAS | -30 | 59 | 617 | 647 | 677 | 700 |
High yield corporate bond spreads were mixed across sectors. The communications sector saw the most significant tightening, while spreads in the basic industry sector widened the most.
HIGH YIELD CORPORATE BOND SPREADS (OAS) BY SECTOR (basis points) 1
| August Change | YTD Change | 2025-08-31 | 2025-07-31 | 2025-06-30 | 2025-05-31 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | -3 | -42 | 266 | 269 | 270 | 290 |
| Technology | -7 | 5 | 269 | 276 | 270 | 279 |
| Energy | -9 | 41 | 291 | 300 | 311 | 349 |
| Consumer Cyclical | -3 | 0 | 250 | 253 | 259 | 285 |
| Transportation | 2 | 84 | 376 | 374 | 376 | 426 |
| Basic Industry | 8 | 23 | 278 | 270 | 279 | 315 |
| Communications | -25 | -102 | 360 | 385 | 437 | 458 |
| Capital Goods | 4 | -2 | 241 | 237 | 244 | 262 |
| Utilities | -7 | -30 | 163 | 170 | 161 | 222 |
| Financials | 6 | -17 | 224 | 218 | 222 | 250 |
The high yield default rate was unchanged for a second consecutive month.
HIGH YIELD DEFAULT RATES 2
| August Change | YTD Change | 2025-08-31 | 2025-07-31 | 2025-06-30 | 2025-05-31 | |
|---|---|---|---|---|---|---|
| Number of Issuers in Default | 0 | 0 | 20 | 20 | 20 | 19 |
| Issuer Default Rate | 0.0% | 0.0% | 2.6% | 2.6% | 2.6% | 2.5% |
Municipals & Other
Municipal bonds posted positive returns in August. Yields fell month-over-month across all ratings and maturity buckets.
MAJOR MUNICIPAL BOND INDEX RETURNS (%) 1
| YTW | Duration (years) | August Return | YTD Return | |
|---|---|---|---|---|
| Short Duration (1-5 Years) | 2.66 | 2.71 | 0.66 | 3.56 |
| Intermediate (1-15 Years) | 3.36 | 4.94 | 0.84 | 2.20 |
| Long Duration (22+ Years) | 4.99 | 11.00 | 0.87 | -3.59 |
MUNICIPAL YIELDS BY RATING CATEGORY AND MATURITY (%) 1
| AAA | AA | A | BBB | |||||
|---|---|---|---|---|---|---|---|---|
| 8/31 | 7/31 | 8/31 | 7/31 | 8/31 | 7/31 | 8/31 | 7/31 | |
| 1 Year | 2.17 | 2.36 | 2.32 | 2.46 | 2.44 | 2.66 | 3.31 | 3.50 |
| 5 Year | 2.35 | 2.50 | 2.54 | 2.63 | 2.69 | 2.91 | 3.52 | 3.69 |
| 10 Year | 3.18 | 3.25 | 3.45 | 3.50 | 3.59 | 3.77 | 4.37 | 4.43 |
| 30 Year | 4.58 | 4.63 | 4.91 | 4.97 | 5.06 | 5.18 | 5.82 | 5.82 |
AA MUNICIPALS – HYPOTHETICAL AFTER-TAX YIELDS BY EFFECTIVE TAX RATE (%) 3
| 35% | 30% | 25% | 20% | |
|---|---|---|---|---|
| 1 Year | 3.57 | 3.31 | 3.09 | 2.90 |
| 5 Year | 3.90 | 3.62 | 3.38 | 3.17 |
| 10 Year | 5.31 | 4.93 | 4.60 | 4.31 |
| 30 Year | 7.55 | 7.01 | 6.54 | 6.14 |
The “other” fixed income sectors were all positive in absolute terms in August, led by convertibles. Global Treasuries trailed similar-duration US Treasuries.
OTHER SECTOR RETURNS (%) 1,4
| Duration (years) | Yield | August Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| Emerging Markets | 5.05 | 7.67 | 1.35 | 0.22 | 8.17 | 3.43 |
| Global Treasuries (Unhedged) | 7.03 | 3.10 | 1.41 | -0.07 | 6.85 | 0.20 |
| S&P/LSTA Leveraged Loan 100 | 8.15 | 0.59 | 4.67 | |||
| Wells Fargo Hybrid & Pref. Securities Aggregate Index | 6.69 | 0.37 | -0.14 | |||
| U.S. Convertibles | 1.59 | 0.81 | 2.27 | 12.21 |
Bond Rating Categories
Standard & Poor’s Ratings Group
AAA An obligation rated “AAA” has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.
AA An obligation rated “AA” differs from the highest rated obligations only in small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
A An obligation rated “A” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher- rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
BBB An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
Obligations rated “BB,” “B,” “CCC,” “CC” and “C” are regarded as having significant speculative characteristics. "BB" indicates the least degree of speculation and “C” the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB,” but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.
CCC An obligation rated “CCC” is currently vulnerable to nonpayment and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC An obligation rated “CC” is currently highly vulnerable to nonpayment.
C A subordinated debt obligation rated “C” is currently highly vulnerable to nonpayment. The “C” rating may be used to cover a situation where a bankruptcy petition has been filed or similar action taken, but payments on this obligation are being continued.
D An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor's believes that such payment will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
For educational purposes only. This update provides an overview of certain broad-based Fixed Income benchmarks and does not include performance of the Segall Bryant & Hamill Fixed Income styles. Past performance cannot guarantee future results. All investments involve risk, including the possible loss of capital. All opinions expressed in this material are solely the opinions of Segall Bryant & Hamill. You should not treat any opinion expressed as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of the manager’s opinions. The opinions expressed are based upon information the manager considers reliable, but completeness or accuracy is not warranted, and it should not be relied upon as such. Market conditions are subject to change at any time, and no forecast can be guaranteed. Any and all information perceived from this material does not constitute financial, legal, tax or other professional advice and is not intended as a substitute for consultation with a qualified professional. The manager’s statements and opinions are subject to change without notice, and Segall Bryant & Hamill is not under any obligation to update or correct any information provided in this material. Advisory services are offered through Segall Bryant and Hamill LLC, a registered investment adviser (“RIA”) with the U.S. Securities and
Exchange Commission (“SEC”).
1 Source: Bloomberg.
2 Source: Bank of America Merrill Lynch.
3 Hypothetical yields are calculated as the AA municipal yield divided by (1-tax rate). Actual tax-adjusted yields will depend on individual tax circumstances.
4 Source: Standard & Poor’s.
