Bond Market - March 13, 2026 (EOD)

 ## Rates Recap Treasury yields moved modestly higher across the curve today amid ongoing geopolitical tensions and mixed economic signals. The 2-year yield edged up slightly, reflecting persistent expectations of a steady Fed policy stance amid sticky inflation data. The 10-year yield also rose, albeit less aggressively, suggesting cautious investor appetite for longer-duration risk given the uncertain inflation outlook and geopolitical risks. The 30-year yield followed suit with a mild increase, indicating some demand for long-term safe haven assets but tempered by concerns over rising oil prices and their inflationary impact. The yield curve flattened marginally as short-term yields increased more than longer maturities. This flattening reflects market anticipation that the Fed will maintain higher rates for longer, despite some hopes for eventual rate cuts later in the year. The 2s10s spread narrowed slightly, signaling investor caution about economic growth prospects amid the Iran conflict and elevated oil prices. Overall, fixed income markets showed a risk-off tone, with investors favoring shorter maturities and inflation-protected securities to hedge against ongoing uncertainty. Key drivers included rising crude oil prices above $100 per barrel, escalating geopolitical tensions in the Middle East, and recent inflation data showing persistent core PCE inflation at 3.1% year-over-year. These factors combined to keep upward pressure on yields, especially at the front end, while longer-term yields were capped by safe-haven demand and growth concerns. ## Bond ETF Scorecard - **$TLT** fell 0.45%, reflecting the modest rise in long-term Treasury yields and some profit-taking after recent rallies. - **$IEF** was nearly flat, down 0.04%, as 7-10 year Treasuries held steady amid mixed signals on economic growth and inflation. - **$SHY** gained 0.21%, benefiting from a flight to safety into short-duration Treasuries amid geopolitical risk and rate uncertainty. - **$TIP** declined 0.20%, indicating a slight pullback in inflation-protected securities despite ongoing inflation concerns. - **$AGG** edged down 0.08%, mirroring broader bond market weakness amid rising yields. - **$BND** declined 0.07%, tracking aggregate bond market softness with a preference for shorter maturities. The outperformance of **$SHY** highlights investor caution, favoring liquidity and lower duration risk. Meanwhile, the modest declines in long-duration ETFs like **$TLT** reflect the yield increases and some rotation away from longer bonds. ## Credit Market Health High yield ETFs showed slight weakness with **$HYG** down 0.28% and **$JNK** down 0.23%, reflecting risk-off sentiment amid geopolitical uncertainty and oil price volatility. Investment grade credit, represented by **$LQD**, also declined 0.37%, with credit spreads modestly wider as investors priced in increased risk premium. Corporate bond issuance remained active, with notable deals such as Salesforce completing a $25 billion senior notes offering to fund share repurchases. Demand for new issuance appears solid but cautious, with investors seeking higher yields amid the risk backdrop. Credit markets are digesting the inflation data and geopolitical risks, leading to a modest widening in spreads but no signs of systemic stress. ## Rate-Sensitive Equities Utilities (**$XLU**) outperformed, rising 1.20%, benefiting from their defensive characteristics and appeal amid rising rates and geopolitical uncertainty. Real estate sector ETF (**$XLRE**) also gained 0.26%, supported by stable income streams and some safe-haven demand. Bank stocks data not fully available, but given the rising short-term yields, net interest margins (NIMs) for banks are likely under positive pressure, potentially supporting bank equities. The dollar ETF (**$UUP**) rose 1.12%, reflecting safe-haven flows and rate differentials. Gold ETF (**$GLD**) declined 1.24%, pressured by the stronger dollar and rising real yields despite geopolitical risks. Growth stocks underperformed broadly, with tech-related names like **$ADBE** (-7.28%) and **$META** (-4.18%) down sharply, while value-oriented sectors showed relative resilience. This suggests a rotation away from growth and rate-sensitive tech amid rising yields and risk aversion. ## Tomorrow's Setup - February CPI and PPI data are due, critical for assessing inflation trajectory and Fed policy outlook. - Treasury will auction 3-year notes, which will test demand amid recent yield volatility. - No major Fed speakers scheduled, but markets will closely watch any commentary for clues on rate path. - Key yield levels to watch: 2-year near recent highs, 10-year around 4.00%, and 30-year approaching 4.20%. - Positioning likely to remain cautious with preference for short duration, inflation protection, and defensive sectors amid geopolitical and inflation uncertainty.