Category: High Yield Weekly

(Bloomberg)  High Yield Market Highlights

• The US junk bond rally fizzled out as uncertainty over the Strait of Hormuz fueled oil prices and expectations of a September Federal Reserve rate hike. High-yield snapped a three—day winning streak despite resilient labor market and strong productivity growth.
• The rally reversed across ratings. CCC yields jumped 20 basis points to 12.60% and spreads widened 13 basis points to 821.
• Though the rally lost some momentum on Thursday, resilient macro data, strong corporate earnings and growing evidence of AI-related benefits support risk-on sentiment, Barclays strategists Brad Rogoff and Dominique Toublan wrote on Friday
• In the primary market, just one $600m deal by OneMain Finance was priced, lifting weekly issuance to $3.3b. Four borrowers sold bonds for $2.7b on Wednesday, lifting year-to-date volume to nearly $201b

(Bloomberg)  US Employers Unexpectedly Shed Jobs

• US employers unexpectedly cut jobs in July and hiring in the prior two months was revised lower, suggesting the labor market is weaker than previously thought after surprising strength earlier this year.
• Nonfarm payrolls decreased 23,000 last month following a combined 103,000 downward revision to the May and June figures, Bureau of Labor Statistics data showed Friday. The unemployment rate fell to 4.1% as labor force participation continued to slide, and wage growth slowed.
• The report suggests the labor market may be starting to falter amid rising prices and uncertainty from the Iran war, despite recent data showing strength in consumer spending and business investment. The data could also prompt the Federal Reserve to delay interest-rate increases as officials weigh inflation against risks to employment.
• US stocks opened higher and Treasury yields fell as investors reduced bets on a Fed rate hike in September. Still, upcoming reports on consumer prices — including data for July next week — could ultimately decide the Fed’s course of action next month.
• “The soft labor market report should lower market expectations for a Fed rate hike in the coming months, but the inflation reports will be the key focus for Fed officials,” Nationwide Chief Economist Kathy Bostjancic said in a note. “If inflation prints run hot for the next few months, then odds of a rate hike increase.”
• The decline in jobs was driven by cuts in government, leisure and hospitality and retail trade. Private-sector payrolls rose by 30,000 for a second month, led by healthcare and social assistance.
• Local government employers shed nearly 60,000 jobs, almost entirely in education, which can be volatile in the summer as many teachers fall off of payrolls before returning again as the school year begins. Federal government payrolls also fell.
• Leisure and hospitality employment declined to the lowest level in almost a year as restaurants and bars shed staff, suggesting the FIFA World Cup that ended July 19 didn’t provide the boost to payrolls many forecasters had anticipated.
• The report comes as high-profile companies announced layoffs throughout the month including Microsoft, Uber Technologies Inc. and Visa Inc. Payrolls in the financial activities sector, a key employer of white-collar workers seen as among the most vulnerable to artificial intelligence adoption, fell to the lowest level in four years.
• Manufacturing and construction payrolls, however, continued to climb. Many economists have pointed to the data-center buildout as a possible driver of demand for construction labor in 2026, even as homebuilding continues to be restrained by high interest rates.
• The participation rate — the share of the population that is working or looking for work — fell to 61.4%, which excluding the pandemic was the lowest since the 1970s. Among those between the ages of 25 and 54, known as prime-age workers, participation edged higher but remained near the lowest levels of the last few years.
• Purchasing power will also be a key issue heading into the November midterm elections, especially as the Iran war has further driven up the cost of living. While consumer sentiment rebounded last month, consumers’ views about their current financial situation remain below levels seen in recent years.
• Other data out this week offered better news. ADP Research said wage gains for private-sector workers who switched jobs picked up in July to the highest in almost a year. Bank of America Institute, meanwhile, found a jump in pay and job gains among lower-income households last month, and a gauge of small-business hiring plans from the National Federation of Independent Business rose to the highest level in almost four years.
• “This does not look credible to me. The numbers don’t jibe with what we’re seeing more broadly for the labor market,” said Stephen Stanley, the chief economist at Santander US Capital Markets LLC. “If the labor market had weakened as much as the June and July jobs report suggests, we’d be hearing it from Fed officials and the economy, and we’re not.”

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds bounced back from Wednesday’s selloff as yields and spreads declined, driving modest gains on a broader risk-on tone as equities recovered on strong corporate earnings and a dip in oil prices.
• The recovery was broad-based, with yields and spreads falling across ratings. CCC yields fell 12 basis points to 12.71%, while spreads tightened 9 basis points to 831.
• Market volatility, fueled by continuing hostilities in the Middle East, climbing oil prices and inflation worries kept new borrowers on the sidelines, with just three deals pricing for $3b, spurring a monthly volume of a little more than $18b
• Three PE-backed firms sold bonds this week.
• Solid private demand growth, moderating inflation and strong earnings remain supportive of the credit markets, but hyperscaler weakness is spreading across the broader AI ecosystem, Barclays’ strategists Bradley Rogoff and Dominique Toublan wrote

(Bloomberg)  Fed Dissenters Say Rate Hikes Needed to Tame High Inflation

• Three Federal Reserve officials who dissented against Wednesday’s decision to hold interest rates steady warned that waiting too long to act against inflation could risk the need for even more aggressive policy moves later.
• “The longer that high inflation persists, the more challenging and costly it can be to bring it back down,” Cleveland Fed President Beth Hammack said in a statement released Friday.
• Minneapolis Fed President Neel Kashkari said in a separate statement that to manage against the risk of high inflation becoming entrenched, he “would rather tighten policy incrementally as we gather more data on the path of inflation and employment.”
• Lorie Logan, head of the Dallas Fed, said in a statement released later Friday that “modest action in the near term would reduce the likelihood of needing to take sharper action later.”
• Fed officials voted 9-3 this week to leave their benchmark rate unchanged for the fifth consecutive meeting. Policymakers have held their target rate in a range of 3.5% to 3.75% all year. But more officials have expressed support for potential rate increases after renewed tensions in the Middle East and a massive investment boom driven by artificial intelligence have revived inflationary pressures.
• Hammack, Kashkari and Logan, who all would have preferred to raise rates this week, pointed to the various supply shocks helping drive up inflation. Hammack said she sees pressure on the demand side of economy as well. Kashkari said that the Fed’s tools can be successful in fighting inflation driven by “successive supply shocks,” as they were in the late 1970s and early 1980s.
• Logan argued that inflation “appears to be trending toward the mid-2’s, not all the way to 2%” — the rate Fed officials target — even after accounting for the supply shocks and gains in productivity. She said the labor market, spending and financial market conditions suggested policy was not restraining the economy and it was unlikely price pressures would fully cool without some action from the Fed.
• All three officials noted that the economy overall is strong right now.
• The Fed’s preferred inflation measure, the personal consumption expenditures index, fell 0.1% in June, data released Thursday showed. A report earlier this month showed a similar decline in another inflation measure, driven by large declines in gasoline prices. Now, economists warn the inflation relief seen earlier this summer may be short lived after a re-escalation of the Iran war pushed oil prices up again in July.
• Hammack said she did not see policy as “appropriately restrictive” to cool price pressures, and was not confident inflation would return to the Fed’s 2% goal on its own.
• “Now is the time for the FOMC to act to speed the return of PCE inflation to our 2% objective and deliver on our commitment to price stability for the American people,” she said.
• The same three regional bank presidents dissented at the Fed’s April meeting. While they supported the decision to hold interest rates then, they objected to language in the post-meeting statement that suggested the next rate move would likely be a cut.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk-bond yields and risk premiums surged the most in four months as rising crude prices, a resilient labor market and escalating tensions with Iran reignited inflation concerns. Yields climbed to a nearly four-month high after rising for five straight sessions, the longest streak since November, triggering the biggest one-day loss since March.
• The selloff swept across the US high-yield market, driving CCC yields and spreads to 15-month highs. BB yields rose for a fifth straight session to finish near a four-month high of 6.30%
• The broad risk-off mood spilled into the primary market, bringing issuance to a near standstill with no new bond sales launched and just one deal pricing.

(Bloomberg)  US Initial Jobless Claims Fall to Lowest Level Since 1969

• First-time applications for US unemployment benefits fell last week to the lowest level since 1969, signaling layoffs remain muted in a stable labor market.
• Initial claims fell by 22,000 to 187,000 in the week ended July 18, according to Labor Department data released Thursday. The median forecast in a Bloomberg survey of economists called for 210,000 applications.
• Continuing claims, a proxy for the number of people receiving benefits, was little changed at 1.8 million in the previous week.
• The low level of claims suggests employers remain reticent to lay off workers. Still, last month’s jobs report showed many Americans left the labor force, which could also help explain fewer filings for unemployment insurance.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bond yields held steady and spreads barely moved as investors remained wary of tech-stocks volatility and stretched valuations. Concerns deepened after data showed US consumer spending accelerated while inflation rose at its fastest pace in more than three years, reinforcing expectations that the Federal Reserve is set to raise interest rates as early as September.
• Elevated valuations and persistent inflation concerns pushed yields and spreads on the riskiest tier of the junk bond market – CCCs – to fresh 14-month highs, driving losses in three of the last four sessions. Yields closed at 12.34% and spreads at 805 basis points.
• The primary market, however, looked past those concerns, as a supply wave persisted with a steady stream of issuance. Three more borrowers sold $1.75b on Thursday, driving the weekly issuance volume to more than $7b, the busiest since mid-May
• Borrowers rushed to take advantage of the still-open capital markets and strong demand before conditions change
• The multiple issues sold on Thursday drove June’s volume to more than $33b, the second-biggest month for supply this year

(Bloomberg)  US Hot Inflation and Spending Data to Keep Fed Cautious

• Hot headline and core inflation, together with a pickup in personal spending, affirm the Fed’s hawkish tilt at the June FOMC meeting. Spending growth was broad-based, and real consumption accelerated even amid high inflation.
• A rise in hiring and wage growth has helped to undergird spending in recent months, and elevated tax refunds and favorable wealth effects also have played a role. Declining global energy prices will suppress headline inflation going forward.
• The PCE deflator increased 0.45% in May (vs. 0.41% prior), boosting the year-on-year inflation pace to 4.1% from 3.8%. The monthly pace of core inflation jumped to 0.32% (from 0.25%). The year-on-year pace rose to 3.4% from 3.3%.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds rose for a second straight session Thursday, driven by robust corporate profits and strong retail sales data that pointed to resilient consumers.
• A steady stream of borrowers in the primary market is driving month-to-date supply to more than $21b, up 33% compared to last year.
• Three more borrowers sold bonds for $3.7b on Thursday driving the week’s tally to more than $8b
• Spread volatility is historically muted despite dangers from inflation and geopolitics. Strong earnings, high yields, and global supply support credit, Barclays strategists Brad Rogoff and Dominique Toublan wrote on Friday.

(Bloomberg)  US Inflation Accelerates as Gas, Rent and Food Prices Climb

• US inflation accelerated in April on rising gasoline and grocery costs, exceeding wage growth in a double-whammy for already strained consumers.
• The consumer price index rose 3.8% from a year earlier, according to Bureau of Labor Statistics data out Tuesday, the most since 2023. After adjusting for inflation, wages fell for the first time in three years.
• The figures show how the impact of the Iran war is hitting the US economy as energy costs surge. The BLS report indicated gas prices rose almost 28% over the past two months. Grocery prices, rents and airfares also saw large increases from a month earlier. A sustained pickup, especially in the cost of essentials, could lead consumers to cut back on spending.
• “Inflation, which we thought was under control, is reaccelerating, and that’s a real problem,” said Gus Faucher, chief economist at PNC Financial Services Group. “The longer inflation remains elevated, the more stress that’s going to place on consumers.”
• Even if the current ceasefire holds and the Strait of Hormuz reopens soon, economists anticipate higher costs are likely to persist in the months ahead as oil output normalizes and shipping flows recover. Rising prices for fertilizer are expected to result in higher grocery bills, and elevated oil prices could also make other goods and services more expensive as companies seek to pass rising transport costs on to consumers.
• One of the main examples in the April CPI data was airfares: They rose 2.8% from a month earlier as the surging cost of jet fuel prompted airlines to raise prices and baggage fees and cut capacity.
• The overall CPI advanced 0.6% in April. Grocery prices rose 0.7%, the most in almost four years. Meats, dairy, fresh fruits and vegetables all posted notable gains. Food prices have been a major contributor to affordability concerns in recent years and could play into Americans’ views of the economy heading into midterm elections.
• A separate report Tuesday that combines the inflation figures with recent wage data showed that real average hourly earnings fell 0.3% from the year before, marking the first drop in three years.
• The core CPI, which excludes food and energy, increased 0.4% from a month earlier and 2.8% from a year earlier, boosted in part by a statistical quirk in the report’s measure of rents resulting from the 2025 government shutdown. Shelter costs were up 0.6% in April, the most in more than two years.
• The rent measures are based on rolling samples of rental housing units collected every six months, and the BLS effectively left them unchanged in October because it wasn’t able to collect data during the shutdown. When those units were priced again in April, they captured a year of increases rather than six months’ worth, making the monthly change in rents look about twice as large as normal.
• Meanwhile, so-called core goods prices, excluding food and energy, were unchanged thanks to a slump in prices for new vehicles. Economists have been watching for signs that retailers have finished passing on the higher costs from President Donald Trump’s tariffs, even as the risk that higher fuel prices start pushing goods prices up again looms for later in the year. Some categories that are more exposed to tariffs — including apparel and toys — rose at a more moderate pace than in March. Used-car prices were flat.
• With the US labor market holding up, Federal Reserve officials are closely tracking the impact the war will have on prices. Investors see little chance of another interest-rate cut in 2026, according to futures, though some economists are still forecasting a reduction later in the year.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds stalled and momentum faltered on skepticism that a peace deal between the US and Iran is likely after reports of a US attack on an Iranian oil tanker, which pushed oil prices higher again.
• Meanwhile, the primary market shrugged off these developments and continued to see a wave of new supply. Eight deals for more than $5b priced Thursday, driving the week’s tally to nearly $12b, the busiest since mid-April even without any data-center linked issuance.
• Eighteen deals priced this week, the most borrowers in a week since September last year
• The new issues performed well in the secondary market against the backdrop of rising oil prices and geopolitical conflict

(Bloomberg)  US Consumer Sentiment Declines to Record Low on Inflation Angst

• US consumer sentiment fell in recent weeks to a fresh record low on concerns about the impact of inflation on personal finances and buying conditions.
• The preliminary May sentiment index decreased to 48.2 from 49.8 in April, according to the University of Michigan. The survey period includes responses from April 21 to May 4.
• Consumers expect prices to rise at an annual rate of 4.5% over the next year, down slightly from a month earlier, data Friday showed. They saw costs rising at an annual rate of 3.4% over the next five to 10 years.
• Confidence continues to languish as Americans’ anxiety about the overall cost of living is compounded by sharply higher prices at the gas pump. The strain on household budgets poses a risk to consumer spending, a primary engine for the economy.
• Gasoline prices breached $4.50 a gallon on average this week for the first time since July 2022, American Automobile Association data show. They’re up more than 50% since the start of the Iran war.
• The report showed “about one-third of consumers spontaneously mentioned gasoline prices and about 30% mentioned tariffs,’’ Joanne Hsu, director of the survey, said in a statement. “Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump.”
• The current conditions gauge dropped to 47.8, the lowest on record. The expectations index rose for the first time since January.
• Consumers’ perceptions of their current financial situation slid to the lowest level since 2009. Buying conditions dropped to a five-month low.
• Meanwhile, the government’s April employment report showed employers added more jobs than expected for a second month. Nonfarm payrolls rose 115,000 last month after an even bigger surge in March, marking the strongest two-month increase since 2024.
• earlier, data Friday showed. They saw costs rising at an annual rate of 3.4% over the next five to 10 years.
• Confidence continues to languish as Americans’ anxiety about the overall cost of living is compounded by sharply higher prices at the gas pump. The strain on household budgets poses a risk to consumer spending, a primary engine for the economy.
• Gasoline prices breached $4.50 a gallon on average this week for the first time since July 2022, American Automobile Association data show. They’re up more than 50% since the start of the Iran war.
• The report showed “about one-third of consumers spontaneously mentioned gasoline prices and about 30% mentioned tariffs,’’ Joanne Hsu, director of the survey, said in a statement. “Taken together, consumers continue to feel buffeted by cost pressures, led by soaring prices at the pump.”
• The current conditions gauge dropped to 47.8, the lowest on record. The expectations index rose for the first time since January.
• Consumers’ perceptions of their current financial situation slid to the lowest level since 2009. Buying conditions dropped to a five-month low.
• Meanwhile, the government’s April employment report showed employers added more jobs than expected for a second month. Nonfarm payrolls rose 115,000 last month after an even bigger surge in March, marking the strongest two-month increase since 2024.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds are set to snap a three-week streak of gains as the US-Iran standoff unsettles investors and drives oil prices higher. Yields have climbed 19 basis points in the past five sessions to 6.94%.
• Meanwhile, still attractive yields and tight spreads produced a supply surge in the primary market. Core Scientific and Edged Compute drove the week’s supply to more than $8.5b, with half of that volume coming from bond sales to fund data center buildouts.
• Core Scientific is the fourth borrower in a week to sell bonds for data centers. That helped push monthly volume to nearly $31b, the busiest April since 2021 and the busiest month since September
• Data centers alone have accounted for more than $13b in April. Meridian Arc Holdco, CoreWeave and Edged Compute also borrowed to finance data centers
• With corporate earnings in focus, guidance and post-earnings supply will be key near-term drivers for credit markets, even as Middle East and AI risks linger, Barclays strategists Brad Rogoff and Dominique Toublan wrote on Friday

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• A steady three-day rally and still-compressed spreads well below 300 basis points powered a supply boom in the junk bond primary market this week. Large cash inflows into the asset class drove the week’s supply to $15b, the busiest since September 2025.
• The supply surge pressured yields and spreads on Thursday, spurring a modest loss and ending the three-day gaining streak.
• The biggest ever data-center related junk bond sale from Meridian Arc Holdings for a Google-backed data center construction in Indiana, drove Thursday’s  issuance volume to $7.6b, the busiest since Sept. 24. Meridian Arc’s $5.7b 5-year bond offering is also the largest ever single tranche in the junk bond primary market. This is solely managed by Morgan Stanley
• These bonds priced at the tight end of price talk after drawing orders of about $19b, the biggest order book for a single tranche USD bond offering in recent years.
• CoreWeave returned to the market within a week after making deals to supply AI cloud capacity to Meta Platforms to sell $1b 9.75% 2031 notes
• It is data-center bonds season in credit markets. The market awaits, at least, a couple of big junk bond sales aimed at data centers buildout next week
• The market focus will steadily shift to corporate earnings in the near term and spread volatility could remain muted, Barclays strategists Brad Rogoff and Dominique Toublan wrote in their weekly note on Friday
• US junk bonds are poised to rebound from Thursday’s loss as the primary market is expected to take a breather

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bonds rallied for a second straight session, with yields dropping to a five-week low, as a fragile ceasefire in the Middle East appeared to hold. Junk bonds are on track for a second straight week of gains.
• Gains spanned the ratings spectrum, supported by a slide in oil below $100 a barrel. The broad rally revived the primary.
• This week’s supply stands at more than $4b and April supply is over $7b
• CCC yields, the riskiest part of the high yield market, fell to a new four-week low of 10.65% on Thursday. CCCs are poised to rack up the best weekly returns since April 2025
• BB yields also fell to close at 5.77%, a new five-week low. Spreads closed at an eight-week low of 158 basis points

(Bloomberg)  US CPI Surges 0.9% in Largest Monthly Jump Since 2022 on Gas

• US inflation surged in March by the most in nearly four years as the war with Iran sent gasoline prices skyrocketing.
• The consumer price index rose 0.9% from February, according to data out Friday. From a year ago, it picked up to 3.3%, the strongest pace since 2024.
• A record increase in gas prices was responsible for nearly three-quarters of the monthly advance, the Bureau of Labor Statistics said. Another measure that excludes food and energy costs increased at a slower 0.2% pace.
• The data underscore how the war in the Middle East is quickly rippling through the US economy, worsening the affordability woes many households have faced in recent years. Americans are already experiencing higher prices at the pump, and service providers including Delta Air Lines Inc. and the US Postal Service have warned of price hikes ahead.
• Even if the US-Iran truce holds and there’s a rapid resolution to the conflict, economists anticipate higher costs are likely to persist in the near term as oil output normalizes. Beyond the energy shock, a disruption in the supply of fertilizer is expected to eventually lead to higher grocery bills, while rising transportation costs could impact all kinds of consumer goods.
• The rise in consumer prices outside of energy was relatively tame in March. The prices of goods excluding food and energy, a category economists and policymakers have been watching closely to gauge the impact of tariffs, rose a modest 0.1% for a second month. Used-car prices fell for a fourth straight month.
• Grocery costs fell 0.2% on a decline in meat, dairy and egg prices. Bloomberg Economics estimates it could take as long as a year for higher fertilizer costs to impact the CPI.
• Services costs excluding energy rose 0.2% in March. Airfares rose 2.7% from February as some customers rushed to lock in prices before they jump further as the war pushes the cost of jet fuel higher. United Airlines Holdings Inc. recently warned it may have to hike prices by 20% because of the oil shock.
• Fed officials are closely tracking the impact the oil shock and the war more broadly will have on prices. Investors see little chance of another interest-rate cut in 2026 amid renewed inflation risks, according to futures, though many economists are maintaining forecasts for one or more reductions later in the year.
• Economists have lowered their growth estimates for this year on expectations that higher prices and a weaker labor market will take a toll on consumer spending. Government data out this week showed inflation-adjusted spending barely rose in February, adding to a streak of sluggish demand.

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.

(Bloomberg)  High Yield Market Highlights

• US junk bond yields reached a new nine-month high on climbing oil prices, and Fed Chair Jerome Powell cautioning that the inflationary fallout from rising energy costs remains uncertain.
• The high-yield primary market has remained quiet.
• Rattled investors pulled more than $3b from US high yield funds last week. The weekly withdrawals were the highest since the tariff-turmoil last April, reflecting the continuing war in Iran and concerns about its potential impact on inflation and growth.
• CCC yields, the riskiest part of the market, breached the 11% level to close at a nine-month high of 11.05%. BB yields also rose to a new nine-month high at 6.14%, on track for a fourth weekly rise, the longest such streak since April 2025.

(Bloomberg)  Fed Holds Rates Steady, Powell Vows to Stay Amid DOJ Probe

• Federal Reserve officials left interest rates unchanged as they acknowledged increased uncertainty due to war in the Middle East.
• Chair Jerome Powell emphasized that to resume lowering rates, officials would have to see progress in reducing inflation, especially goods inflation that has been boosted by tariffs.
• “If we don’t see that progress, then we won’t see the rate cut,” Powell said in remarks to reporters after the Fed released its decision.
• That progress may be difficult to achieve. In economic forecasts released with their decision, officials raised their outlook for inflation in 2026 to 2.7% from 2.4%. Notably, they saw the core measure — which excludes volatile food and energy categories — also rising to 2.7%.
• Powell surprised Fed watchers by making some definitive statements about his near-term future at the central bank. He told reporters he had “no intention” of resigning as a member of the Fed’s Board of Governors until an investigation by the Department of Justice into a building renovation project is “well and truly over.”
• He said that if his successor is not confirmed before his term as chair ends in May, he would serve as chair pro tempore. The Fed has conferred that temporary designation in the past on a board member to lead the institution when the chair role was vacant. Powell’s term as a governor extends until January 2028.
• He said he hadn’t decided whether he would depart if the investigation were closed.
• The Federal Open Market Committee voted 11-1 to hold the benchmark federal funds rate in a range of 3.5% to 3.75%. Governor Stephen Miran dissented, calling for a quarter-point reduction.
• In their post-meeting statement, policymakers underscored the uncertainty they’re facing in the economy due to the conflict in the Middle East, as did Powell in his press conference.
• “It is too soon to know the scope and duration of the potential effects on the economy,” Powell said. “The thing I really want to emphasize is that nobody knows.”
• Asked about the impact of surging oil prices on inflation, Powell acknowledged that central bankers typically don’t raise rates when energy prices jump because the impact on inflation is temporary. But that approach, he said, has always depended on the public continuing to expect inflation will settle around the Fed’s 2% goal over the long term. He also noted that inflation in the US has been above the Fed’s 2% target for five years.
• Powell said the committee had again discussed the possibility that the Fed’s next rate move could be a hike, but added, “the vast majority of participants don’t see that as their base case.”
• Wednesday’s decision marks the second straight time officials held rates in place, though the economic backdrop has changed significantly since their last meeting. In January, policymakers signaled growing confidence the unemployment rate was stabilizing. Soon after, several officials sounded intent on holding rates for an extended period to help nudge inflation lower.
• Then came a weak February employment report that cast fresh doubt on the steadiness of the labor market. US-Israeli strikes against Iran that began Feb. 28 have also caused global oil prices to surge, threatening to boost inflation and undermine growth and employment.
• Officials dropped language from their January statement describing the labor market as showing signs of stabilization. In its place, they said the unemployment rate was “little changed in recent months.”

This information is intended solely to report on investment strategies identified by Cincinnati Asset Management. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. Fixed income securities may be sensitive to prevailing interest rates. When rates rise the value generally declines. Past performance is not a guarantee of future results.