Monthly Market Monitor

September 2025

Macro

Last month, U.S. labor market trends continued to weaken as the August employment report came in below expectations. The three-month average nonfarm payroll growth has decelerated to just 29,000 jobs added per month and the unemployment rate rose to 4.3%. A gloomy JOLTS report indicated that companies are becoming more cautious in managing headcount as job openings fell to 7.18 million in July, the lowest level in 10 months.

At the annual Jackson Hole Economic Policy Symposium, Federal Reserve (Fed) Chair Jerome Powell's remarks were interpreted as dovish, as he acknowledged the downside risks to employment given recent trends. Markets have discounted additional fed funds rate cuts, and as of September 5, the two-year U.S. Treasury reached year-to-date lows.

Credit

During August, U.S. investment grade bond sales approached $100 billion, which was slightly above estimates. Thus far in September, new issue markets have been very active, and strong issuance is expected to continue throughout the month, based on dealer forecasts.

Investment grade credit spreads were modestly wider in August but remain near historic lows. Investor demand for long duration credit has remained robust, resulting in very flat credit curves.

Structured

In August, asset-backed securities market activity was generally quiet with limited issuance. However, September is expected to have a marked uptick in primary market activity.

Mortgage-backed securities performed well in August, with excess returns of 47 basis points. This marked the strongest performance for the month of August since 1989. The sector was aided by a combination of moderate supply, a slight curve steepener and low interest rate volatility.

Chart of the Month

Total Money Market Assets and Daily Balance of the Fed's Reverse Repo Program

Despite rising expectations for upcoming fed funds rate cuts, the demand for money market funds has continued to push total assets to new highs.
Usage of the Fed's reverse repo facility has plummeted as cash investors have turned to U.S. Treasury bills, which have seen a surge in issuance by the Treasury following the July debt ceiling increase.

As of 8/29/2025. Source: Bloomberg L.P. View accessible version of chart.

Market Data

Yields	YTM %	MTD Change	QTD Change	YTD Change
3-Mo UST	4.15	-0.20	-0.15	-0.18
2-Yr UST	3.62	-0.34	-0.10	-0.63
5-Yr UST	3.70	-0.28	-0.10	-0.69
10-Yr UST	4.23	-0.15	0.00	-0.34
30-Yr UST	4.93	0.03	0.15	0.15

Risk Premia	OAS (bps)	MTD Change	QTD Change	YTD Change
Investment Grade Credit	75	3	-4	-2
Asset-Backed Securities	51	0	-6	7
High Yield	272	-6	-18	-15

As of 8/29/2025. 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	6.59	-0.04	0.79	1.06	5.38
Mortgage-Backed Securities	5.86	0.47	0.59	1.61	5.48
Asset-Backed Securities	2.61	0.05	0.27	0.96	4.05
High Yield	2.71	0.20	1.88	1.25	6.35

	Duration (yrs.)	MTD Excess Return (%)	YTD Excess Return (%)	MTD Total Return (%)	YTD Total Return (%)
Index
1-3-Yr Government Credit	1.78	0.01	0.16	0.88	3.80
Intermediate Government/Credit	3.67	-0.03	0.27	1.22	5.26
U.S. Aggregate	5.94	0.11	0.37	1.20	4.99

As of 8/29/2025. Source: Bloomberg L.P.

Total Money Market Assets and Daily Balance of the Fed's Reverse Repo Program

	Fed Reserve Repo Balance ($B)	Money Market Funds AUM ($B)
8/5/2022	2,195	4,575,483
11/4/2022	2,231	4,631,800
2/3/2023	2,041	4,821,374
5/5/2023	2,207	5,309,749
11/3/2023	1,071	5,695,186
2/2/2024	513	6,001,741
5/3/2024	450	6,001,108
11/1/2024	155	6,509,639
2/7/2025	95	6,917,817
5/2/2025	148	6,908,570

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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.

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