Treasury Curve Steepens Amid Trade Fog
April highlights from the fixed income markets:
- Fixed income returns were mixed in April: Treasuries performed well across all but the long end, while most other major asset classes were flat to negative.
- Uncertainty around tariff and trade policies drove a generally cautious tone from economists and corporations as they await further clarity from Washington.
- The Bloomberg U.S. Aggregate Index (the Agg) returned 0.39% for the month and is up 3.18% year-to-date. In April, most sub-sectors posted positive absolute returns while underperforming similar-duration Treasuries.
- Corporate spreads widened in every sector across both the investment grade (IG) and high yield (HY) corporate spaces in April. The energy sector experienced the widest spreads in both categories.
- Municipal bonds showed continued weakness, predominantly on long muni bonds.
Read on for more details and analysis.
Market Summary
Treasuries performed well in April—as they have for most of 2025—leading all major fixed income asset classes.
YIELDS & RETURNS (%) 1
| Duration (years) | Yield | April Return | YTD Return | |
|---|---|---|---|---|
| Treasuries | 5.93 | 3.94 | 0.63 | 3.57 |
| Investment Grade Corporates | 6.93 | 5.14 | -0.03 | 2.27 |
| High Yield Corporates | 3.45 | 7.9 | -0.02 | 0.98 |
| Municipal Bonds | 6.59 | 4.06 | -0.81 | -1.03 |
U.S. Treasury Market
The intermediate, or “belly” of the Treasury curve dropped in April, while yields on the long end increased.
TREASURY YIELDS (%) 1
| April Change | YTD Change | 2025-04-30 | 2025-03-31 | 2025-02-28 | 2025-01-31 | |
|---|---|---|---|---|---|---|
90-Day T-Bills | -0.01 | -0.04 | 4.29 | 4.30 | 4.30 | 4.29 |
| 2-year Treasury | -0.30 | -0.66 | 3.59 | 3.90 | 3.99 | 4.20 |
| 5-year Treasury | -0.24 | -0.68 | 3.71 | 3.96 | 4.01 | 4.33 |
| 10-year Treasury | -0.06 | -0.42 | 4.15 | 4.21 | 4.20 | 4.54 |
| 30-year Treasury | 0.10 | -0.10 | 4.69 | 4.58 | 4.47 | 4.80 |
Treasury returns were positive on the short and intermediate parts of the curve, and negative on the long end.
TREASURY RETURNS (%) 1
| Duration (years) | April Return | YTD Returns | |
|---|---|---|---|
| 90-Day T-Bills | 0.24 | 0.35 | 1.39 |
| 2-year Treasury | 1.94 | 0.84 | 2.44 |
| 5-year Treasury | 4.59 | 1.41 | 4.46 |
| 10-year Treasury | 7.95 | 0.82 | 4.85 |
| 30-year Treasury | 16.24 | -1.24 | 2.99 |
| U.S. Treasury TIPS | 6.70 | 0.12 | 4.29 |
Broad Investment Grade
The Agg posted a positive absolute return while underperforming Treasuries. Long corporates were the weakest sub-component of the Agg, as long Treasury rates increased and spreads widened.
INVESTMENT GRADE INDEX & SECTOR RETURNS (%) 1
| Duration (years) | Yield | April Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| U.S. Aggregate | 6.11 | 4.51 | 0.39 | -0.25 | 3.18 | -0.49 |
| Treasuries | 5.93 | 3.94 | 0.63 | 0.00 | 3.57 | 0.00 |
| Agencies | 3.67 | 4.17 | 0.72 | -0.07 | 2.84 | -0.06 |
| Mortgage-Backed Securities | 5.95 | 4.93 | 0.29 | -0.38 | 3.35 | -0.47 |
| Asset-Backed Securities | 2.63 | 4.49 | 0.49 | -0.24 | 2.03 | -0.53 |
| Intermediate Corporates | 4.19 | 4.81 | 0.58 | -0.50 | 2.86 | -0.81 |
| Long Corporates | 12.77 | 5.86 | -1.29 | -0.87 | 1.06 | -2.87 |
IG corporate spreads widened across all maturity buckets, as did current-coupon MBS spreads.
INVESTMENT GRADE SPREADS (basis points) 1
| April Change | YTD Change | 2025-04-30 | 2024-03-31 | 2025-02-28 | 2025-01-31 | |
|---|---|---|---|---|---|---|
| 1-3 Yr Corporates | 15 | 21 | 73 | 58 | 52 | 49 |
| Intermediate Corporates | 15 | 27 | 98 | 83 | 76 | 69 |
| Long Corporates | 7 | 25 | 123 | 116 | 108 | 98 |
| MBS Current Coupon Spread | 8 | 14 | 139 | 130 | 123 | 127 |
Absolute returns were mixed among the IG ratings categories; single-As were the top performer. Excess returns were negative for all categories.
INVESTMENT GRADE CORPORATE CREDIT QUALITY RETURNS (%) 1
| Duration (years) | Yield | April Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| AAA | 10.07 | 4.74 | -0.07 | -0.02 | 2.62 | -1.12 |
| AA | 7.83 | 4.74 | 0.06 | -0.28 | 2.49 | -1.09 |
| A | 6.90 | 4.96 | 0.15 | -0.43 | 2.53 | -1.21 |
| BBB | 6.74 | 5.40 | -0.22 | -0.87 | 1.99 | -1.84 |
Spreads widened across every IG sector, led wider by the Energy sector.
INVESTMENT GRADE CORPORATE BOND SPREADS BY SECTOR (basis points) 2
| April Change | YTD Change | 4/30/2024 | 2024-03-31 | 2024-02-28 | 2024-01-31 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | 8 | 18 | 91 | 84 | 78 | 71 |
| Technology | 11 | 24 | 88 | 77 | 72 | 64 |
| Energy | 22 | 39 | 131 | 109 | 101 | 92 |
| Consumer Cyclical | 16 | 38 | 109 | 93 | 82 | 70 |
| Transportation | 11 | 29 | 104 | 93 | 84 | 74 |
| Basic Industry | 14 | 27 | 119 | 104 | 96 | 90 |
| Communications | 8 | 24 | 121 | 112 | 104 | 96 |
| Capital Goods | 10 | 21 | 93 | 83 | 78 | 69 |
| Utilities | 9 | 30 | 112 | 103 | 97 | 88 |
| Financials | 13 | 26 | 108 | 95 | 87 | 79 |
High Yield
Returns in the high yield space were essentially flat in aggregate while underperforming Treasuries. Spreads moved wider across all ratings categories, led by the riskiest category, CCCs.
HIGH YIELD SECTOR RETURNS (%) 1
| Duration (years) | Yield | April Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| High Yield Corporates | 3.45 | 7.90 | -0.02 | -1.00 | 0.98 | -2.15 |
| BB | 3.70 | 6.57 | 0.13 | -0.87 | 1.62 | -1.62 |
| B | 3.25 | 7.92 | 0.00 | -0.97 | 0.74 | -2.28 |
| CCC | 3.00 | 11.66 | -0.75 | -1.71 | -1.19 | -4.25 |
HIGH YIELD OPTION-ADJUSTED SPREADS (OAS) (basis points) 1
| April Change | YTD Change | 2024-04-30 | 2024-03-31 | 2024-02-28 | 2024-01-31 | |
|---|---|---|---|---|---|---|
| High Yield OAS | 37 | 97 | 384 | 347 | 280 | 261 |
| BB OAS | 31 | 71 | 250 | 219 | 178 | 156 |
| B OAS | 37 | 106 | 383 | 346 | 270 | 250 |
| CCC OAS | 94 | 212 | 770 | 676 | 547 | 518 |
Spreads widened across every HY sector. Similar to IG sector activity, the Energy sector showed the most spread weakness.
HIGH YIELD CORPORATE BOND SPREADS (OAS) BY SECTOR (basis points) 1
| April Change | YTD Change | 2025-04-30 | 2024-03-31 | 2024-02-28 | 2024-01-31 | |
|---|---|---|---|---|---|---|
| Consumer Non-Cyclical | 20 | 69 | 376 | 355 | 298 | 291 |
| Technology | 15 | 96 | 360 | 345 | 270 | 253 |
| Energy | 134 | 196 | 447 | 312 | 248 | 220 |
| Consumer Cyclical | 33 | 90 | 340 | 306 | 234 | 220 |
| Transportation | 73 | 241 | 533 | 460 | 310 | 268 |
| Basic Industry | 57 | 128 | 383 | 326 | 250 | 232 |
| Communications | 22 | 75 | 537 | 515 | 457 | 430 |
| Capital Goods | 4 | 66 | 309 | 304 | 228 | 210 |
| Utilities | 3 | 80 | 273 | 270 | 218 | 196 |
| Financials | 25 | 65 | 306 | 281 | 232 | 212 |
The high yield default rate was unchanged in April.
HIGH YIELD DEFAULT RATES 2
| April Change | YTD Change | 2025-02-28 | 2024-01-31 | 2024-12-31 | 2024-11-29 | |
|---|---|---|---|---|---|---|
| Number of Issuers in Default | 0 | -7 | 17 | 17 | 18 | 25 |
| Issuer Default Rate | 0.0% | -0.9% | 2.2% | 2.2% | 2.3% | 3.2% |
Municipals & Other
Municipal bonds lost ground in April, most significantly on long-duration munis.
MAJOR MUNICIPAL BOND INDEX RETURNS (%) 1
| YTW | Duration (years) | April Return | YTD Return | |
|---|---|---|---|---|
| Short Duration (1-5 Years) | 3.39 | 2.66 | -0.39 | 0.58 |
| Intermediate (1-15 Years) | 3.74 | 4.89 | -0.62 | -0.23 |
| Long Duration (22+ Years) | 4.76 | 10.46 | -1.27 | -2.72 |
MUNICIPAL YIELDS BY RATING CATEGORY AND MATURITY (%) 1
| AAA | AA | A | BBB | |||||
|---|---|---|---|---|---|---|---|---|
| 4/30 | 3/31 | 4/30 | 3/31 | 4/30 | 3/31 | 4/30 | 3/31 | |
| 1 Year | 2.85 | 2.54 | 3.11 | 2.70 | 3.26 | 2.99 | 4.08 | 3.64 |
| 5 Year | 3.03 | 2.85 | 3.32 | 3.01 | 3.49 | 3.32 | 4.32 | 3.94 |
| 10 Year | 3.34 | 3.19 | 3.68 | 3.45 | 3.89 | 3.69 | 4.63 | 4.26 |
| 30 Year | 4.39 | 4.21 | 4.73 | 4.51 | 4.89 | 4.63 | 5.66 | 5.30 |
AA MUNICIPALS – HYPOTHETICAL AFTER-TAX YIELDS BY EFFECTIVE TAX RATE (%) 3
| 35% | 30% | 25% | 20% | |
|---|---|---|---|---|
| 1 Year | 4.78 | 4.44 | 4.14 | 3.88 |
| 5 Year | 5.11 | 4.74 | 4.43 | 4.15 |
| 10 Year | 5.66 | 5.26 | 4.90 | 4.60 |
| 30 Year | 7.28 | 6.76 | 6.31 | 5.92 |
Global Treasuries posted strong absolute returns and negative excess returns. Preferred stocks were the weakest “other” sector.
OTHER SECTOR RETURNS (%) 1,4
| Duration (years) | Yield | April Return | Duration adj. vs. Treasuries | YTD Return | Duration adj. vs. Treasuries | |
|---|---|---|---|---|---|---|
| Emerging Markets | 5.09 | 8.64 | -0.29 | -1.10 | 1.30 | -2.27 |
| Global Treasuries (Unhedged) | 7.20 | 2.97 | 3.64 | -0.02 | 6.33 | 0.11 |
| S&P/LSTA Leveraged Loan 100 | 8.15 | 0.49 | 0.94 | |||
| Wells Fargo Hybrid & Pref. Securities Aggregate Index | 6.69 | -0.72 | -3.74 | |||
| U.S. Convertibles | 1.59 | 0.81 | 1.04 | -0.26 |
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.
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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.
