Monthly Market Monitor

December 2025

Macro

The 43-day U.S. government shutdown — the longest ever — ended on November 12, allowing agencies to resume operations and release delayed economic data. The disruption had stalled key reports and added uncertainty to economic assessments.

The September payrolls report (released in November) beat expectations but showed that the unemployment rate rose to 4.4%. The delayed report may overstate labor strength, with multiple job-cut headlines since the data was collected. October data will be released following December's Federal Open Market Committee (FOMC) meeting.

Implied market pricing for the December FOMC meeting has been volatile in recent weeks but odds have risen in early December to the point where a 25-basis-point (bp) cut is almost fully priced into investor expectations.

Credit

There was healthy issuance in both investment-grade (IG) and high-yield (HY) bonds during November, with year-to-date gross supply up 13% and 9% versus last year, respectively. Dealers expect about $40 billion in new issuance to come to market in December but concentrated in the first two weeks of the month.

In November, IG credit spreads widened modestly, resulting in excess returns that were slightly negative for the month. Within HY, B-rated and BB-rated outperformed BBB-rated issues by 31 bps and 19 bps, respectively.

Structured

Issuance of asset-backed securities (ABS) topped $40 billion in November. Monthly excess returns for ABS were 5 bps, making it the second-best performing sector in the Bloomberg US Aggregate Bond Index (the Agg). The performance was driven largely by auto ABS, which recovered most of the prior month's losses despite robust new supply.

Excess returns for mortgage-backed securities (MBS) were slightly lower for the month, but returns for the full year continue to outpace credit. Historically, December has been a favorable month for MBS, which have posted positive monthly excess returns in 13 of the past 15 years, averaging +21 bps — the highest of any month of the year.

Chart of the Month

The Agg Turns a Corner, (%)

After months of volatility amid trade tensions, tariff announcements and volatile economic data, the Agg has now posted four consecutive months of positive returns.
The year-to-date total return for the index is an impressive 7.46%.

As of 11/30/2025. Source: Bloomberg L.P. View accessible version of chart.

Market Data

Yields	YTM %	MTD Change	QTD Change	YTD Change
3-Mo UST	3.80	-0.01	-0.14	-0.52
2-Yr UST	3.49	-0.08	-0.12	-0.75
5-Yr UST	3.60	-0.09	-0.15	-0.79
10-Yr UST	4.02	-0.06	-0.14	-0.56
30-Yr UST	4.66	0.01	-0.07	-0.12

Risk Premia	OAS (bps)	MTD Change	QTD Change	YTD Change
Investment Grade Credit	76	2	6	-1
Asset-Backed Securities	55	0	6	11
High Yield	269	-12	2	-18

As of 11/30/2025. 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	6.66	-0.05	1.00	0.62	8.04
Mortgage-Backed Securities	5.54	-0.05	1.20	0.62	8.35
Asset-Backed Securities	2.67	0.05	0.42	0.56	5.61
High Yield	2.69	0.00	2.17	0.58	8.01

	Duration (yrs.)	MTD Excess Return (%)	YTD Excess Return (%)	MTD Total Return (%)	YTD Total Return (%)
Index
1-3-Yr Government Credit	1.78	0.01	0.19	0.47	4.98
Intermediate Government/Credit	3.68	-0.01	0.37	0.67	6.87
U.S. Aggregate	5.93	-0.03	0.58	0.62	7.46

As of 11/30/2025. Source: Bloomberg L.P.

Accessible Chart: The Agg Turns a Corner (%)


Month	MTD Return	YTD Cumulative Returns
January	0.53	0.53
February	2.20	2.74
March	0.03	2.78
April	0.39	3.18
May	-0.72	2.45
June	1.54	4.02
July	-0.26	3.75
August	1.12	4.99
September	1.09	6.13
October	0.62	6.80
November	0.62	7.46

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.

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