Highlights from the fixed income markets:
- The Bloomberg U.S. Aggregate Index (the Agg) started 2026 with a small gain of 0.11%, outperforming similar-duration Treasuries. Performance was led by mortgage-backed securities (MBS), which rallied on the news that Fannie Mae and Freddie Mac may purchase up to $200 billion of MBS.
- Yields increased across the Treasury curve, with the largest move occurring in the 10‑year segment. Performance was mixed: short‑dated Treasuries generated positive returns, while most of the remaining curve delivered losses.
- Investment grade (IG) corporate sector spreads tightened by single digits across every sector. IG spreads are, once again, close to or at multi-year tights.
- High yield performance was strong in January, led by BBs. Spreads varied across sectors, with half widening (led by technology) and half tightening (led by energy).
- In its January meeting, the Federal Reserve left the Fed Funds rate unchanged. Futures markets are expecting 2-3 quarter point cuts in 2026.
Market Summary
Fixed income began the year with generally positive returns, led by municipal bonds; Treasuries slipped modestly.
YIELDS & RETURNS (%) 1
| Duration (years) | Yield | January Return | YTD Return | |
|---|---|---|---|---|
| Treasuries | 5.86 | 3.97 | -0.09 | -0.09 |
| Investment Grade Corporates | 6.89 | 4.84 | 0.18 | 0.18 |
| High Yield Corporates | 3.01 | 6.58 | 0.51 | 0.51 |
| Municipal Bonds | 6.13 | 3.45 | 0.94 | 0.94 |
U.S. Treasury Market
Yields rose across the Treasury curve in January; the 10‑year saw the largest increase.
TREASURY YIELDS (%) 1
| January Change | Year-to-Date Change | 2026-01-31 | 2025-12-31 | 2025-11-30 | 2025-10-31 | |
|---|---|---|---|---|---|---|
| 90-Day T-Bills | 0.02 | 0.02 | 3.66 | 3.63 | 3.79 | 3.81 |
| 2-year Treasury | 0.07 | 0.07 | 3.53 | 3.47 | 3.49 | 3.60 |
| 5-year Treasury | 0.09 | 0.09 | 3.80 | 3.71 | 3.60 | 3.71 |
| 10-year Treasury | 0.11 | 0.11 | 4.26 | 4.15 | 4.02 | 4.09 |
| 30-year Treasury | 0.06 | 0.06 | 4.89 | 4.83 | 4.67 | 4.66 |
Short Treasuries showed positive returns for the month, while weaker returns were seen further out the curve.
TREASURY RETURNS (%) 1
| Duration (years) | January Return | YTD Return | |
|---|---|---|---|
| 90-Day T-Bills | 0.24 | 0.30 | 0.30 |
| 2-year Treasury | 1.95 | 0.18 | 0.18 |
| 5-year Treasury | 4.60 | -0.10 | -0.10 |
| 10-year Treasury | 8.10 | -0.49 | -0.49 |
| 30-year Treasury | 16.00 | -0.59 | -0.59 |
| U.S. Treasury TIPS | 6.64 | 0.31 | 0.31 |
Investment Grade
The Agg eked out a small absolute return while also outperforming similar-duration Treasuries. Mortgage-backed securities (MBS) were the strongest sub-segment of the Agg, reflecting recent news that Fannie Mae and Freddie Mac may purchase up to $200 billion of MBS from the public market.
INVESTMENT GRADE INDEX & SECTOR RETURNS (%) 1
| Duration (years) | Yield | January Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| U.S. Aggregate | 5.97 | 4.36 | 0.11 | 0.22 | 0.11 | 0.22 |
| Treasuries | 5.86 | 3.97 | -0.09 | 0.00 | -0.09 | 0.00 |
| Agencies | 3.83 | 4.00 | 0.12 | 0.08 | 0.12 | 0.08 |
| Mortgage-Backed Securities | 5.53 | 4.64 | 0.41 | 0.52 | 0.41 | 0.52 |
| Asset-Backed Securities | 2.85 | 4.12 | 0.25 | 0.14 | 0.25 | 0.14 |
| Intermediate Corporates | 4.15 | 4.45 | 0.22 | 0.28 | 0.22 | 0.28 |
| Long Corporates | 12.74 | 5.68 | 0.09 | 0.47 | 0.09 | 0.47 |
IG spreads tightened in January, once again approaching or surpassing multi-year tight levels.
INVESTMENT GRADE SPREADS (basis points) 1
| January Change | Year-to-Date Change | 2026-01-31 | 2025-12-31 | 2025-11-30 | 2025-10-31 | |
|---|---|---|---|---|---|---|
| 1-3 Yr Corporates | -6 | -6 | 45 | 51 | 51 | 49 |
| Intermediate Corporates | -6 | -6 | 64 | 70 | 73 | 70 |
| Long Corporates | -3 | -3 | 91 | 94 | 97 | 96 |
| MBS Current Coupon Spread | -14 | -14 | 75 | 89 | 102 | 103 |
Within investment‑grade corporates, lower ratings categories outperformed higher-rated segments.
INVESTMENT GRADE CORPORATE CREDIT QUALITY RETURNS (%) 1
| Duration (years) | Yield | January Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| AAA | 10.09 | 4.74 | -0.25 | 0.04 | -0.25 | 0.04 |
| AA | 7.93 | 4.66 | -0.05 | 0.14 | -0.05 | 0.14 |
| A | 6.88 | 4.71 | 0.12 | 0.28 | 0.12 | 0.28 |
| BBB | 6.64 | 5.01 | 0.28 | 0.44 | 0.28 | 0.44 |
Spreads tightened by single digits across each of the IG corporate sectors.
INVESTMENT GRADE CORPORATE BOND SPREADS BY SECTOR (basis points) 1
| January Change | YTD Change | 2026-01-31 | 2025-12-31 | 2025-11-30 | 2025-10-31 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | -4 | -4 | 63 | 67 | 70 | 70 |
| Technology | -4 | -4 | 72 | 76 | 76 | 72 |
| Energy | -7 | -7 | 82 | 90 | 94 | 93 |
| Consumer Cyclical | -7 | -7 | 64 | 71 | 75 | 74 |
| Transportation | -5 | -5 | 67 | 72 | 76 | 75 |
| Basic Industry | -6 | -6 | 82 | 88 | 93 | 87 |
| Communications | -3 | -3 | 91 | 95 | 97 | 97 |
| Capital Goods | -6 | -6 | 57 | 63 | 67 | 64 |
| Utilities | -6 | -6 | 79 | 85 | 88 | 84 |
| Financials | -4 | -4 | 74 | 78 | 80 | 78 |
High Yield
High yield returns were positive in January, led by BBs.
HIGH YIELD SECTOR RETURNS (%) 1
| Duration (years) | Yield | January Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| High Yield Corporates | 3.01 | 6.58 | 0.51 | 0.44 | 0.51 | 0.44 |
| BB | 3.22 | 5.55 | 0.54 | 0.48 | 0.54 | 0.48 |
| B | 2.73 | 6.77 | 0.46 | 0.36 | 0.46 | 0.36 |
| CCC | 2.81 | 9.73 | 0.32 | 0.21 | 0.32 | 0.21 |
HIGH YIELD OPTION-ADJUSTED SPREADS (OAS) (basis points) 1
| January Change | YTD Change | 2026-01-31 | 2025-12-31 | 2025-11-30 | 2025-10-31 | |
|---|---|---|---|---|---|---|
| High Yield OAS | -1 | -1 | 265 | 266 | 269 | 281 |
| BB OAS | -6 | -6 | 159 | 165 | 161 | 171 |
| B OAS | 15 | 15 | 283 | 268 | 274 | 286 |
| CCC OAS | -20 | -20 | 595 | 615 | 625 | 611 |
High yield sector spread moves were mixed for the month. Technology sector spreads widened the most, while energy sector spreads tightened the most.
HIGH YIELD CORPORATE BOND SPREADS (OAS) BY SECTOR (basis points) 1
| January Change | YTD Change | 2026-01-31 | 2025-12-31 | 2025-11-30 | 2025-10-31 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | -9 | -9 | 237 | 246 | 233 | 246 |
| Technology | 64 | 64 | 380 | 316 | 330 | 296 |
| Energy | -35 | -35 | 236 | 271 | 264 | 291 |
| Consumer Cyclical | -17 | -17 | 235 | 252 | 265 | 269 |
| Transportation | -10 | -10 | 352 | 363 | 371 | 397 |
| Basic Industry | -16 | -16 | 275 | 291 | 298 | 310 |
| Communications | 10 | 10 | 358 | 347 | 355 | 350 |
| Capital Goods | 3 | 3 | 216 | 213 | 209 | 272 |
| Utilities | 13 | 13 | 159 | 147 | 127 | 159 |
| Financials | 7 | 7 | 230 | 224 | 225 | 238 |
Issuer defaults rose by three in January; however, the default rate remains low relative to historical norms.
HIGH YIELD DEFAULT RATES 2
| January Change | Year-to-Date Change | 2026-01-31 | 2025-12-31 | 2025-11-30 | 2025-10-31 | |
|---|---|---|---|---|---|---|
| Number of Issuers in Default | 3 | 3 | 20 | 17 | 16 | 16 |
| Issuer Default Rate | 0.4% | 0.4% | 2.6% | 2.2% | 2.1% | 2.1% |
Municipals & Other
Municipal bonds had a strong start to the year. Muni yields fell across all short and intermediate maturity & ratings categories, while remaining essentially unchanged on long maturities.
MAJOR MUNICIPAL BOND INDEX RETURNS (%) 1
| YTW | Duration (years) | January Return | YTD Return | |
|---|---|---|---|---|
| Short Duration (1-5 Years) | 2.55 | 2.71 | 0.82 | 0.82 |
| Intermediate (1-15 Years) | 2.95 | 4.61 | 1.06 | 1.06 |
| Long Duration (22+ Years) | 4.57 | 9.56 | 0.50 | 0.50 |
MUNICIPAL YIELDS BY RATING CATEGORY AND MATURITY (%) 1
| AAA | AA | A | BBB | |||||
|---|---|---|---|---|---|---|---|---|
| 31-Jan | 31-Dec | 31-Jan | 31-Dec | 31-Jan | 31-Dec | 31-Jan | 31-Dec | |
| 1 Year | 2.23 | 2.47 | 2.32 | 2.53 | 2.54 | 2.80 | 3.62 | 3.75 |
| 5 Year | 2.22 | 2.37 | 2.39 | 2.53 | 2.60 | 2.80 | 3.67 | 3.65 |
| 10 Year | 2.60 | 2.71 | 2.81 | 2.96 | 3.10 | 3.28 | 4.06 | 4.09 |
| 30 Year | 4.16 | 4.13 | 4.49 | 4.45 | 4.78 | 4.79 | 5.59 | 5.61 |
AA MUNICIPALS – HYPOTHETICAL AFTER-TAX YIELDS BY EFFECTIVE TAX RATE (%) 3
| 35% | 30% | 25% | 20% | |
|---|---|---|---|---|
| 1 Year | 3.56 | 3.31 | 3.09 | 2.89 |
| 5 Year | 3.68 | 3.42 | 3.19 | 2.99 |
| 10 Year | 4.32 | 4.01 | 3.74 | 3.51 |
| 30 Year | 6.90 | 6.41 | 5.98 | 5.61 |
Convertibles had a strong January, returning over 5% for the month. Leveraged loans were the weakest performer in the “Other” categories.
OTHER SECTOR RETURNS (%) 1,4
| Duration (years) | Yield | January Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| Emerging Markets | 5.17 | 7.08 | 1.05 | 1.12 | 1.05 | 1.12 |
| Global Treasuries (Unhedged) | 6.88 | 3.21 | 0.87 | 0.06 | 0.87 | 0.06 |
| S&P/LSTA Leveraged Loan 100 | 7.25 | -0.62 | -0.62 | |||
| Wells Fargo Hybrid & Pref. Securities Aggregate Index | 6.69 | 1.81 | 1.81 | |||
| U.S. Convertibles | 1.41 | 1.02 | 5.02 | 5.02 |
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 CI Segall Bryant & Hamill Asset Management, (“Segall Bryant & Hamill”) Fixed Income styles. Past performance cannot guarantee future results. All investments involve risk, including the possible loss of capital. One cannot invest directly in an index. 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.
