Highlights from the fixed income markets:
- Fixed income showed strength again in October, with all major categories posting positive absolute returns.
- The Bloomberg U.S. Aggregate Index (the Agg) returned 0.62% for the month – its third consecutive positive month, and eighth out of ten for the year. Overall performance was flat versus duration-adjusted Treasuries, with positive excess returns within the MBS sector offset by negative excess returns in corporates.
- Investment grade (“IG”) corporate bond spreads widened across every sector, led wider by the communications and technology sectors.
- High yield performance favored higher-quality credits, with BBs outperforming Bs and CCCs in both absolute and excess return terms. Spreads widened across all ratings categories.
- Municipal bonds had a strong month overall; short munis posted small losses, while intermediate and long munis generated strong returns.
- The Federal Reserve reduced the Fed Funds rate by 0.25% in its October meeting, following a similar move in September.
Market Summary
Municipal bonds led performance in October. All major categories delivered positive returns.
YIELDS & RETURNS (%) 1
| Duration (years) | Yield | October Return | YTD Return | |
|---|---|---|---|---|
| Treasuries | 5.94 | 3.91 | 0.62 | 6.01 |
| Investment Grade Corporates | 6.99 | 4.82 | 0.38 | 7.29 |
| High Yield Corporates | 3.16 | 6.78 | 0.16 | 7.39 |
| Municipal Bonds | 6.18 | 3.57 | 1.24 | 3.91 |
U.S. Treasury Market
Treasury yields declined across the curve, with the largest drops at the short and long ends.
TREASURY YIELDS (%) 1
| October Change | Year-to-Date Change | 2025-10-31 | 2025-09-30 | 2025-08-31 | 2025-07-31 | |
|---|---|---|---|---|---|---|
| 90-Day T-Bills | -0.13 | -0.52 | 3.81 | 3.94 | 4.14 | 4.34 |
| 2-year Treasury | -0.01 | -0.65 | 3.60 | 3.61 | 3.61 | 3.94 |
| 5-year Treasury | -0.03 | -0.68 | 3.71 | 3.74 | 3.69 | 3.96 |
| 10-year Treasury | -0.06 | -0.48 | 4.09 | 4.15 | 4.22 | 4.36 |
| 30-year Treasury | -0.07 | -0.12 | 4.66 | 4.73 | 4.92 | 4.89 |
Treasury returns were positive across all maturities, with the strongest gains at the long end.
TREASURY RETURNS (%) 1
| Duration (years) | October Return | YTD Return | |
|---|---|---|---|
| 90-Day T-Bills | 0.24 | 0.36 | 3.58 |
| 2-year Treasury | 1.95 | 0.32 | 4.13 |
| 5-year Treasury | 4.61 | 0.46 | 6.50 |
| 10-year Treasury | 8.05 | 0.78 | 7.85 |
| 30-year Treasury | 16.16 | 1.39 | 5.70 |
| U.S. Treasury TIPS | 6.71 | 0.35 | 7.25 |
Broad Investment Grade
The Agg delivered another month of positive absolute returns—its eighth out of ten in 2025—matching duration-adjusted Treasuries. In excess return terms, mortgage-backed securities (MBS) led performance, while long corporates lagged.
INVESTMENT GRADE INDEX & SECTOR RETURNS (%) 1
| Duration (years) | Yield | October Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| U.S. Aggregate | 6.04 | 4.33 | 0.62 | 0.00 | 6.80 | 0.61 |
| Treasuries | 5.94 | 3.91 | 0.62 | 0.00 | 6.01 | 0.00 |
| Agencies | 3.85 | 4.03 | 0.50 | 0.06 | 5.41 | 0.29 |
| Mortgage-Backed Securities | 5.56 | 4.66 | 0.86 | 0.26 | 7.68 | 1.25 |
| Asset-Backed Securities | 2.76 | 4.22 | 0.38 | -0.02 | 5.02 | 0.36 |
| Intermediate Corporates | 4.18 | 4.48 | 0.38 | -0.08 | 6.98 | 1.08 |
| Long Corporates | 12.87 | 5.53 | 0.40 | -0.71 | 7.99 | 0.71 |
IG bond spreads widened slightly for the month but remain moderately tighter year-to-date.
INVESTMENT GRADE SPREADS (basis points) 1
| October Change | Year-to-Date Change | 2025-10-31 | 2025-09-30 | 2025-08-31 | 2025-07-31 | |
|---|---|---|---|---|---|---|
| 1-3 Yr Corporates | 3 | -3 | 49 | 46 | 50 | 47 |
| Intermediate Corporates | 4 | -1 | 70 | 66 | 72 | 68 |
| Long Corporates | 6 | -2 | 96 | 90 | 94 | 94 |
| MBS Current Coupon Spread | -2 | -22 | 103 | 105 | 110 | 126 |
Returns by IG ratings category were all positive in absolute terms while underperforming Treasuries.
INVESTMENT GRADE CORPORATE CREDIT QUALITY RETURNS (%) 1
| Duration (years) | Yield | October Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| AAA | 10.43 | 4.64 | 0.36 | -0.57 | 6.67 | -0.09 |
| AA | 7.87 | 4.56 | 0.35 | -0.39 | 6.61 | 0.36 |
| A | 6.99 | 4.68 | 0.47 | -0.20 | 7.35 | 1.02 |
| BBB | 6.77 | 5.00 | 0.31 | -0.34 | 7.35 | 0.97 |
Spreads widened across every IG sector in October, led wider by the communications and technology sectors.
INVESTMENT GRADE CORPORATE BOND SPREADS BY SECTOR (basis points) 1
| October Change | YTD Change | 2025-10-31 | 2025-09-30 | 2025-08-31 | 2025-07-31 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | 3 | -3 | 70 | 67 | 72 | 69 |
| Technology | 10 | 7 | 72 | 62 | 66 | 63 |
| Energy | 5 | 1 | 93 | 89 | 96 | 93 |
| Consumer Cyclical | 2 | 2 | 74 | 71 | 77 | 75 |
| Transportation | 3 | 0 | 75 | 71 | 76 | 76 |
| Basic Industry | 3 | -5 | 87 | 84 | 88 | 86 |
| Communications | 11 | 0 | 97 | 86 | 90 | 86 |
| Capital Goods | 3 | -7 | 64 | 62 | 67 | 64 |
| Utilities | 2 | 2 | 84 | 81 | 86 | 84 |
| Financials | 4 | -4 | 78 | 74 | 80 | 77 |
High Yield
High yield performance favored higher-quality credits, with BBs outperforming Bs and CCCs in both absolute and excess return terms. Spreads widened across all rating tiers.
HIGH YIELD SECTOR RETURNS (%) 1
| Duration (years) | Yield | October Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
High Yield Corporates | 3.16 | 6.78 | 0.16 | -0.24 | 7.39 | 2.16 |
BB | 3.39 | 5.70 | 0.43 | 0.02 | 7.87 | 2.49 |
B | 2.93 | 6.88 | -0.06 | -0.44 | 6.69 | 1.62 |
CCC | 2.80 | 9.86 | -0.29 | -0.67 | 7.76 | 2.66 |
HIGH YIELD OPTION-ADJUSTED SPREADS (OAS) (basis points) 1
| October Change | Year-to-Date Change | 2025-10-31 | 2025-09-30 | 2025-08-31 | 2025-07-31 | |
|---|---|---|---|---|---|---|
High Yield OAS | 14 | -6 | 281 | 267 | 272 | 278 |
BB OAS | 3 | -8 | 171 | 168 | 170 | 169 |
B OAS | 23 | 9 | 286 | 263 | 266 | 265 |
CCC OAS | 7 | 53 | 611 | 604 | 617 | 647 |
Spreads moved wider across most high yield sectors; only consumer non-cyclicals tightened. Spreads in the transportation sector widened the most.
HIGH YIELD CORPORATE BOND SPREADS (OAS) BY SECTOR (basis points) 1
| October Change | YTD Change | 2025-10-31 | 2025-09-30 | 2025-08-31 | 2025-07-31 | |
|---|---|---|---|---|---|---|
Consumer Non-Cyclical | -13 | -61 | 246 | 259 | 266 | 269 |
Technology | 23 | 32 | 296 | 273 | 269 | 276 |
Energy | 23 | 41 | 291 | 268 | 291 | 300 |
Consumer Cyclical | 16 | 19 | 269 | 253 | 250 | 253 |
Transportation | 44 | 106 | 397 | 353 | 376 | 374 |
Basic Industry | 34 | 55 | 310 | 276 | 278 | 270 |
Communications | 8 | -112 | 350 | 343 | 360 | 385 |
Capital Goods | 22 | 29 | 272 | 249 | 241 | 237 |
Utilities | 0 | -34 | 159 | 159 | 163 | 170 |
Financials | 13 | -4 | 238 | 224 | 224 | 218 |
The high yield default rate moved lower in October.
HIGH YIELD DEFAULT RATES 2
| October Change | YTD Change | 2025-10-31 | 2025-09-30 | 2025-08-31 | 2025-07-31 | |
|---|---|---|---|---|---|---|
Number of Issuers in Default | -2 | -4 | 16 | 18 | 20 | 20 |
Issuer Default Rate | -0.3% | -0.5% | 2.1% | 2.4% | 2.6% | 2.6% |
Municipals & Other
Municipal bond performance was mixed: long and intermediate maturities posted strong gains, while short maturities saw slight losses. Yields generally rose on short maturities and declined across intermediate and long maturities.
MAJOR MUNICIPAL BOND INDEX RETURNS (%) 1
| YTW | Duration (years) | October Return | YTD Return | |
|---|---|---|---|---|
Short Duration (1-5 Years) | 2.83 | 2.72 | -0.07 | 3.76 |
Intermediate (1-15 Years) | 3.16 | 4.67 | 0.87 | 4.61 |
Long Duration (22+ Years) | 4.48 | 9.45 | 1.83 | 2.15 |
MUNICIPAL YIELDS BY RATING CATEGORY AND MATURITY (%) 1
| AAA | AA | A | BBB | |||||
|---|---|---|---|---|---|---|---|---|
10/31 | 9/30 | 10/31 | 9/30 | 10/31 | 9/30 | 10/31 | 9/30 | |
1 Year | 2.52 | 2.28 | 2.68 | 2.51 | 2.94 | 2.74 | 3.77 | 3.54 |
5 Year | 2.37 | 2.29 | 2.55 | 2.48 | 2.79 | 2.81 | 3.77 | 3.61 |
10 Year | 2.72 | 2.90 | 2.91 | 3.13 | 3.11 | 3.54 | 4.18 | 4.31 |
30 Year | 4.06 | 4.24 | 4.38 | 4.54 | 4.61 | 4.87 | 5.64 | 5.66 |
AA MUNICIPALS – HYPOTHETICAL AFTER-TAX YIELDS BY EFFECTIVE TAX RATE (%) 3
| 35% | 30% | 25% | 20% | |
|---|---|---|---|---|
| 1 Year | 4.12 | 3.82 | 3.57 | 3.35 |
| 5 Year | 3.92 | 3.64 | 3.40 | 3.19 |
| 10 Year | 4.47 | 4.15 | 3.88 | 3.63 |
| 30 Year | 6.74 | 6.26 | 5.84 | 5.48 |
Performance across the ‘other’ fixed income sectors was mixed. Preferred stocks lagged, while emerging market bonds and convertibles led the group.
OTHER SECTOR RETURNS (%) 1,4
| Duration (years) | Yield | October Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
Emerging Markets | 5.20 | 7.36 | 2.95 | 2.42 | 11.72 | 5.76 |
Global Treasuries (Unhedged) | 7.05 | 3.06 | -0.55 | 0.05 | 6.70 | 0.34 |
S&P/LSTA Leveraged Loan 100 |
| 7.32 | 0.46 |
| 5.79 |
|
Wells Fargo Hybrid & Pref. Securities Aggregate Index |
| 6.68 | -1.26 |
| -1.48 |
|
U.S. Convertibles | 1.32 | 1.07 | 3.10 |
| 21.40 |
|
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.
