Monthly Market Monitor

July 2025

Macro

At its June 18 meeting, the Federal Open Market Committee (FOMC) voted unanimously to hold rates steady at 4.25%-4.50%. The committee noted that economic uncertainty had diminished since the previous meeting and that the U.S. economy remains on solid footing. The FOMC's updated “dot plot” suggests a cumulative 50 basis points (bps) of cuts to the fed funds rate before year end, which has been the case since the March FOMC meeting. Additionally, inflation projections for 2025 and 2026 rose modestly higher, reflecting the anticipated impact of tariffs in the coming months.

The June payroll report exceeded expectations, indicating labor markets remain resilient despite signs of moderating economic activity. The unemployment rate fell to 4.1%, supporting the Federal Reserve's “wait-and-see” approach to enacting additional rate cuts.

Credit

During the month of June, almost $110 billion in new issuance was priced, which came in above forecasts, and brought the year-to-date total to $900 billion. Investor demand remained resilient; deals were well over-subscribed and resulted in only modest spread concessions to bonds for the same issuer with similar tenors.

Credit spreads compressed further in June and have now fully recovered from the tariff-induced sell-off back in March and April. Within investment grade credit, Financials have been the top year-to-date performing sector, with excess returns of 50 bps. Industrials have posted excess returns of 34 bps, while Utilities have underperformed, with a negative excess return of 34 bps.

Structured

In the first half of the year, Auto asset-backed securities (ABS) slightly outperformed Credit Card ABS, with excess returns of 22 bps and 20 bps, respectively. Credit Card supply exceeded expectations, with new issuance from several money center banks.

Strong demand from asset managers, positive regulatory news, a steady decline in rates and a drop in implied volatility all aided mortgage-backed securities' performance in June.

Chart of the Month

Yield Curve Steepening

Year-to-date, yield curves have continued to steepen, reaching the highest levels since 2021.
While shorter-dated yields have fallen in recent months, reflecting expectations for rate cuts, long-end yields remain pressured by fiscal concerns.

As of 6/30/2025. Source: Bloomberg L.P. View accessible version of chart.

Market Data

Yields	YTM %	MTD Change	QTD Change	YTD Change
3-Mo UST	4.30	-0.04	0.00	-0.02
2-Yr UST	3.72	-0.18	-0.16	-0.52
5-Yr UST	3.80	-0.17	-0.15	-0.59
10-Yr UST	4.23	-0.17	0.02	-0.34
30-Yr UST	4.78	-0.16	0.20	-0.01

Risk Premia	OAS (bps)	MTD Change	QTD Change	YTD Change
Investment Grade Credit	79	-4	-10	2
Asset-Backed Securities	57	-2	-3	13
High Yield	290	-24	-57	3

As of 6/30/2025. Source: Bloomberg L.P.

Bloomberg Sector/Index Performance (USD)

	Duration (yrs.)	MTD Excess Return (%)	YTD Excess Return (%)	MTD Total Return (%)	YTD Total Return (%)
Sector
Investment Grade Credit	6.62	0.36	0.26	1.83	4.22
Mortgage-Backed Securities	5.92	0.36	0.10	1.78	4.23
Asset-Backed Securities	2.56	0.12	-0.02	0.87	2.93
High Yield	2.70	1.00	1.04	1.84	4.57

	Duration (yrs.)	MTD Excess Return (%)	YTD Excess Return (%)	MTD Total Return (%)	YTD Total Return (%)
Index
1-3-Yr Government Credit	1.80	0.03	0.11	0.64	2.92
Intermediate Government/Credit	3.69	0.08	0.15	1.07	4.13
U.S. Aggregate	6.00	0.19	0.10	1.54	4.02

As of 6/30/2025. Source: Bloomberg L.P.

Yield Curve Steepening

Category	5s/30s	10s/30s
12/31/2024	39.92	21.22
1/31/2025	45.95	24.8
2/28/2025	47.03	28.12
3/31/2025	62.11	36.54
4/30/2025	95.1	51.55
5/30/2025	96.88	53.01
6/30/2025	97.8	54.6

Important Disclosures

This publication is for informational purposes only. Information contained herein is believed to be accurate, but has not been verified and cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice or a forecast or guarantee of future results. To the extent specific securities are referenced herein, they have been selected on an objective basis to illustrate the views expressed in the commentary. Such references do not include all material information about such securities, including risks, and are not intended to be recommendations to take any action with respect to such securities. The securities identified do not represent all of the securities purchased, sold or recommended and it should not be assumed that any listed securities were or will prove to be profitable. Past performance is no guarantee of future results.

Indices and/or Benchmarks Definitions

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