Market Synopsis 7.11.25

Bond market prices were lower this week, primarily driven by shifting economic data and monetary policy expectations, as well as the ever-changing headlines which negatively affected the bond market. U.S. Treasury yields rose in response to a stronger-than-expected June jobs report. The robust employment data dampened hopes for immediate Federal Reserve rate cuts, pushing the 10-year Treasury yield to around 4.35% by Thursday (July 10^th). This upward pressure on yields suggests that the market is recalibrating its expectations for the Fed's easing cycle, anticipating that inflation might be more resilient than expected.

Investment-grade corporate bond spreads tightened, showing strong demand for corporate credit despite the increased supply of new issuance. This suggests investors are finding value in the relatively higher yields offered by corporate bonds compared to Treasuries, even with overall yields ticking up.

While the "One Big Beautiful Bill Act" raised the debt ceiling $5 trillion (clearing the way for new Treasury debt issuance) the Congressional Budget Office (CBO) still estimates that the government's ability to borrow could be exhausted in August or September 2025 if not addressed further. This ongoing fiscal uncertainty, while not causing immediate alarm this week, remains a long-term focal point for bond investors. The passage of the budget and domestic policy bill also contributed to higher yields as some investors saw it adding to the federal deficit, thus adding another layer of complexity to the fiscal outlook.