July highlights from the fixed income markets:
- Risk assets in the fixed income space performed well in July. High yield corporates posted strong results while Treasuries were the weakest broad category.
- The Bloomberg U.S. Aggregate Index (the Agg) lost 0.26% in July. In absolute terms, Treasuries and mortgage-backed securities were the weakest categories, offset by slight gains from asset-backed securities and intermediate corporates. The top excess returns came from intermediate and long corporates; mortgage-backed securities had the weakest excess returns.
- Treasury yields moved higher across the entire curve.
- Corporate bond spreads tightened across every IG sector, approaching multi-year tights. In the HY space, spread moves were mixed across sectors but the trend was tighter, overall.
- The high yield default rate rose slightly but remains low by historical standards.
Read on for more details and analysis.
Market Summary
July was a strong month for risk assets. High yield corporates performed well, while Treasuries trailed the other major asset classes.
YIELDS & RETURNS (%) 1
| Duration (years) | Yield | July Return | YTD Return | |
|---|---|---|---|---|
| Treasuries | 5.86 | 4.19 | -0.39 | 3.39 |
| Investment Grade Corporates | 6.92 | 5.07 | 0.07 | 4.24 |
| High Yield Corporates | 3.23 | 7.08 | 0.45 | 5.04 |
| Municipal Bonds | 6.86 | 3.98 | -0.20 | -0.55 |
U.S. Treasury Market
Treasury yields rose across the curve in July, most notably in the 2- to 5-year maturities.
TREASURY YIELDS (%) 1
| July Change | Year-to-Date Change | 7/31/2025 | 6/30/2025 | 5/31/2025 | 4/30/2025 | |
|---|---|---|---|---|---|---|
| 90-Day T-Bills | 0.05 | 0.01 | 4.34 | 4.29 | 4.34 | 4.29 |
| 2-year Treasury | 0.22 | -0.31 | 3.94 | 3.72 | 3.89 | 3.59 |
| 5-year Treasury | 0.17 | -0.43 | 3.96 | 3.79 | 3.95 | 3.71 |
| 10-year Treasury | 0.13 | -0.22 | 4.36 | 4.23 | 4.39 | 4.15 |
| 30-year Treasury | 0.11 | 0.11 | 4.89 | 4.78 | 4.91 | 4.69 |
T-bills delivered positive returns in July, while the rest of the curve—particularly longer maturities—posted negative performance.
TREASURY RETURNS (%) 1
| Duration (years) | July Return | YTD Return | |
|---|---|---|---|
| 90-Day T-Bills | 0.25 | 0.35 | 2.46 |
| 2-year Treasury | 1.94 | -0.12 | 2.61 |
| 5-year Treasury | 4.59 | -0.41 | 4.34 |
| 10-year Treasury | 8.03 | -0.68 | 4.36 |
| 30-year Treasury | 15.92 | -1.26 | 0.83 |
| U.S. Treasury TIPS | 6.61 | 0.12 | 4.79 |
Broad Investment Grade
The Bloomberg U.S. Aggregate Index (the Agg) posted a small loss in July while outperforming Treasuries. The top excess returns came from intermediate and long corporates; mortgage-backed securities had the weakest excess returns.
INVESTMENT GRADE INDEX & SECTOR RETURNS (%) 1
| Duration (years) | Yield | July Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| U.S. Aggregate | 6.06 | 4.64 | -0.26 | 0.16 | 3.75 | 0.26 |
| Treasuries | 5.86 | 4.19 | -0.39 | 3.39 | ||
| Agencies | 3.81 | 4.38 | -0.11 | 0.03 | 3.33 | 0.16 |
| Mortgage-Backed Securities | 5.86 | 5.07 | -0.40 | 0.00 | 3.81 | 0.10 |
| Asset-Backed Securities | 2.70 | 4.53 | 0.13 | 0.23 | 3.06 | 0.21 |
| Intermediate Corporates | 4.17 | 4.74 | 0.13 | 0.44 | 4.58 | 0.87 |
| Long Corporates | 12.78 | 5.76 | -0.07 | 0.83 | 3.57 | 0.72 |
Spreads tightened by single digits across all IG maturity buckets, hitting their tightest levels of the year and approaching multi-year tights.
INVESTMENT GRADE SPREADS (basis points) 1
| July Change | Year-to-Date Change | 7/31/2025 | 6/30/2025 | 5/31/2025 | 4/30/2025 | |
|---|---|---|---|---|---|---|
| 1-3 Yr Corporates | -5 | -5 | 47 | 52 | 57 | 73 |
| Intermediate Corporates | -7 | -3 | 68 | 75 | 80 | 98 |
| Long Corporates | -6 | -4 | 94 | 100 | 106 | 123 |
| MBS Current Coupon Spread | 1 | 1 | 126 | 125 | 134 | 139 |
Both absolute and excess returns were more positive in the riskier ratings categories within the IG corporate space.
INVESTMENT GRADE CORPORATE CREDIT QUALITY RETURNS (%) 1
| Duration (years) | Yield | July Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| AAA | 9.88 | 4.84 | -0.24 | 0.45 | 3.30 | 0.30 |
| AA | 7.73 | 4.80 | -0.13 | 0.42 | 3.65 | 0.51 |
| A | 6.91 | 4.94 | 0.05 | 0.55 | 4.28 | 0.86 |
| BBB | 6.72 | 5.24 | 0.12 | 0.61 | 4.33 | 0.80 |
IG corporate spreads tightened by single digits across every sector, led by the utilities and consumer cyclical sectors.
INVESTMENT GRADE CORPORATE BOND SPREADS BY SECTOR (basis points) 1
| July Change | YTD Change | 7/31/2024 | 6/30/2024 | 5/31/2024 | 4/30/2024 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | -5 | -5 | 69 | 74 | 76 | 91 |
| Technology | -4 | -2 | 63 | 67 | 69 | 88 |
| Energy | -8 | 1 | 93 | 101 | 109 | 131 |
| Consumer Cyclical | -9 | 3 | 75 | 84 | 89 | 109 |
| Transportation | -6 | 1 | 76 | 82 | 87 | 104 |
| Basic Industry | -7 | -6 | 86 | 93 | 100 | 119 |
| Communications | -6 | -11 | 86 | 92 | 102 | 121 |
| Capital Goods | -7 | -8 | 64 | 71 | 74 | 93 |
| Utilities | -9 | 1 | 84 | 93 | 97 | 112 |
| Financials | -8 | -6 | 77 | 85 | 90 | 108 |
High Yield
High yield corporates performed well in July, led by CCCs.
HIGH YIELD SECTOR RETURNS (%) 1
| Duration (years) | Yield | July Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| High Yield Corporates | 3.23 | 7.08 | 0.45 | 0.59 | 5.04 | 1.66 |
| BB | 3.50 | 5.99 | 0.20 | 0.37 | 5.19 | 1.74 |
| B | 2.97 | 6.98 | 0.32 | 0.43 | 4.72 | 1.41 |
| CCC | 2.88 | 10.72 | 1.47 | 1.58 | 5.07 | 1.72 |
HIGH YIELD OPTION-ADJUSTED SPREADS (OAS) (basis points) 1
| July Change | YTD Change | 7/31/2025 | 6/30/2025 | 5/31/2025 | 4/30/2025 | |
|---|---|---|---|---|---|---|
| High Yield OAS | -12 | -9 | 278 | 290 | 315 | 384 |
| BB OAS | -2 | -10 | 169 | 171 | 191 | 250 |
| B OAS | -16 | -12 | 265 | 281 | 301 | 383 |
| CCC OAS | -30 | 89 | 647 | 677 | 700 | 770 |
High yield corporate spreads were mixed; the communications sector tightened the most, while the utilities sector widened the most.
HIGH YIELD CORPORATE BOND SPREADS (OAS) BY SECTOR (basis points) 1
| July Change | YTD Change | 7/31/2025 | 6/30/2025 | 5/31/2025 | 4/30/2025 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | -1 | -38 | 269 | 270 | 290 | 376 |
| Technology | 6 | 12 | 276 | 270 | 279 | 360 |
| Energy | -11 | 50 | 300 | 311 | 349 | 447 |
| Consumer Cyclical | -6 | 4 | 253 | 259 | 285 | 340 |
| Transportation | -2 | 82 | 374 | 376 | 426 | 533 |
| Basic Industry | -9 | 14 | 270 | 279 | 315 | 383 |
| Communications | -52 | -77 | 385 | 437 | 458 | 537 |
| Capital Goods | -7 | -6 | 237 | 244 | 262 | 309 |
| Utilities | 8 | -23 | 170 | 161 | 222 | 273 |
| Financials | -4 | -23 | 218 | 222 | 250 | 306 |
The number of HY issuers to have defaulted in the previous 12 months increased by 1 in July. The default rate remains low by historic standards.
HIGH YIELD DEFAULT RATES 2
| July Change | YTD Change | 7/31/2025 | 6/30/2025 | 5/31/2025 | 4/30/2025 | |
|---|---|---|---|---|---|---|
| Number of Issuers in Default | 1 | 0 | 20 | 19 | 20 | 17 |
| Issuer Default Rate | 0.1% | 0.0% | 2.6% | 2.5% | 2.6% | 2.2% |
Municipals & Other
Municipal bond performance was mixed; short and intermediate munis posted gains while long munis lost over 1% for the month. Yields fell across most of the curve while increasing on the long end.
MAJOR MUNICIPAL BOND INDEX RETURNS (%) 1
| YTW | Duration (years) | July Return | YTD Return | |
|---|---|---|---|---|
| Short Duration (1-5 Years) | 2.81 | 2.67 | 0.75 | 2.88 |
| Intermediate (1-15 Years) | 3.48 | 4.95 | 0.25 | 1.35 |
| Long Duration (22+ Years) | 5.02 | 11.24 | -1.08 | -4.42 |
MUNICIPAL YIELDS BY RATING CATEGORY AND MATURITY (%) 1
| AAA | AA | A | BBB | |||||
|---|---|---|---|---|---|---|---|---|
| 7/31 | 6/30 | 7/31 | 6/30 | 7/31 | 6/30 | 7/31 | 6/30 | |
| 1 Year | 2.36 | 2.57 | 2.46 | 2.67 | 2.66 | 2.85 | 3.50 | 3.69 |
| 5 Year | 2.50 | 2.70 | 2.63 | 2.86 | 2.91 | 3.06 | 3.69 | 3.87 |
| 10 Year | 3.25 | 3.19 | 3.50 | 3.52 | 3.77 | 3.73 | 4.43 | 4.56 |
| 30 Year | 4.63 | 4.47 | 4.97 | 4.91 | 5.18 | 5.14 | 5.82 | 5.89 |
AA MUNICIPALS – HYPOTHETICAL AFTER-TAX YIELDS BY EFFECTIVE TAX RATE (%) 3
| 35% | 30% | 25% | 20% | |
|---|---|---|---|---|
| 1 Year | 3.78 | 3.51 | 3.27 | 3.07 |
| 5 Year | 4.05 | 3.76 | 3.51 | 3.29 |
| 10 Year | 5.39 | 5.01 | 4.67 | 4.38 |
| 30 Year | 7.65 | 7.10 | 6.63 | 6.21 |
Global IG Treasuries were weak in July, while the remaining bonds in the “other” category were strong in the month.
OTHER SECTOR RETURNS (%) 1,4
| Duration (years) | Yield | July Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| Emerging Markets | 5.09 | 7.80 | 1.33 | 1.66 | 6.72 | 3.16 |
| Global Investment Grade Treasuries (Unhedged) | 7.08 | 3.15 | -2.03 | 0.01 | 5.37 | 0.28 |
| S&P/LSTA Leveraged Loan Index | 7.62 | 0.82 | 4.05 | |||
| S&P Preferred Stock Index | 6.83 | 2.00 | -0.51 | |||
| U.S. Convertibles | 1.43 | 0.93 | 2.82 | 9.71 |
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.
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.
