Bond Market - February 25, 2026 (EOD)

 ## Rates Recap Treasury yields moved higher across the curve today, reflecting a risk-on market tone and expectations of continued Fed policy vigilance. The 2-year yield, which is highly sensitive to Fed rate expectations, rose modestly, while the 10-year and 30-year yields experienced slightly larger increases. This dynamic suggests that investors are pricing in a sustained period of elevated short-term rates alongside modestly higher long-term inflation or growth expectations. The yield curve flattened slightly as the 2-year yield increased less than the 10-year and 30-year yields. The 10s30s spread steepened marginally, indicating some investor anticipation of stronger growth or inflation further out. Key drivers included robust equity gains led by tech stocks, easing AI-related market jitters, and a cautious but optimistic outlook on inflation and economic data. Overall, fixed income markets showed a mild risk appetite with investors balancing inflation concerns against growth prospects. ## Bond ETF Scorecard - **$TLT** edged down -0.06%, reflecting modest selling in long-duration Treasuries amid higher yields. - **$IEF** declined -0.17%, consistent with rising intermediate-term yields and curve flattening. - **$SHY** was nearly flat, down -0.01%, as short-term yields remained anchored by Fed policy expectations. - **$TIP** inched up +0.09%, signaling stable inflation expectations despite the broader rise in nominal yields. - **$AGG** slipped -0.05%, reflecting a broad-based modest selloff in the aggregate bond market. - **$BND** declined -0.03%, tracking the overall bond market softness. The modest declines in Treasury ETFs indicate cautious positioning amid rising yields, while TIPS held steady, suggesting inflation expectations remain well-anchored. ## Credit Market Health High yield ETFs showed slight gains with **$HYG** up +0.14% and **$JNK** up +0.17%, supported by strong equity markets and stable risk appetite. Investment grade credit via **$LQD** was flat to slightly down (-0.03%), reflecting a cautious tone amid rising Treasury yields. Credit spreads remained relatively stable with no significant widening or tightening, indicating balanced investor sentiment toward credit risk. Corporate bond issuance and demand data were not notable today. ## Rate-Sensitive Equities Rate-sensitive sectors diverged. Real estate via **$XLRE** declined -0.66%, pressured by higher long-term yields and cautious outlooks from some REIT earnings. Utilities (**$XLU**) gained +0.40%, benefiting from their defensive characteristics and steady dividend appeal amid market optimism. Bank stocks showed mixed performance but generally positive moves: **$JPM** (+4.36%), **$GS** data not available, and **$BAC** data not available. The rise in bank shares suggests optimism about net interest margin (NIM) expansion as short-term rates remain elevated. The dollar ETF **$UUP** declined -0.11%, reflecting some dollar weakness amid risk-on sentiment. Gold via **$GLD** fell slightly -0.15%, pressured by higher real yields and a stronger equity market. Growth stocks outperformed value, with tech-heavy Nasdaq 100 up +1.12% versus S&P 500 up +0.68%. ## Tomorrow's Setup - Key economic data includes January CPI and PPI releases, with markets focused on inflation trajectory. - Treasury auctions scheduled for 3-year notes and 10-year TIPS, which will test demand amid rising yields. - Fed speakers are expected, potentially providing further clues on policy outlook. - Watch 10-year Treasury yield key levels near recent highs for signs of resistance or breakout. - Positioning may remain cautious ahead of Nvidia earnings and CPI data, balancing AI optimism with inflation concerns.