US debt market weekly round up - 6 Dec 2025

This week's story in plain English: bond yields rose and got a bit jumpy as incoming data left traders debating whether the Fed will cut rates next month and by how much after a string of mixed readings. That pushed borrowing costs up for mortgage and corporate borrowers, but pockets of the credit market still look calm — investors are hunting yield even as they watch economic signals closely.

The ISM's services PMI for November printed in expansion territory at 52.6, while ISM manufacturing continued to show muted activity. Services readings suggest the economy is still growing but not overheating. Solid-but-not-strong PMI numbers tend to be bond-friendly if they lower the odds of further Fed tightening; this week they only partly reassured markets, leaving yields higher overall as other data pointed the other way.

This week's economic calendar produced mixed signals. Weekly jobless claims and other datapoints moved markets day-to-day. Key monthly US payrolls (the BLS nonfarm payrolls for November) were delayed in December due to earlier government disruptions, so markets leaned on partial indicators and nowcasts. With fewer clean data points, yields were sensitive to headline news and central-bank signals — that helped push the 10-year yield upward on net this week.

Bonds trade on expectations for inflation and Fed policy. Mixed data raises uncertainty: traders push yields up when they think policy will stay firmer, or down if they expect easier policy. This week tilted toward slightly firmer expectations — hence higher yields.

The 10-year Treasury yield ended the week around 4.14%, while the 30-year was roughly near 4.8%. The 2-year yield moved less than long yields, leaving the 10-2 spread positive and near ~0.58% (about 58 basis points). The 2s-10s curve is positive this week, meaning the curve is not inverted. That suggests markets are less focused on an immediate recession signal and more on the timing of Fed cuts and term premiums.

Mixed macro prints and Fed commentary left traders uncertain about the timing of rate cuts; that uncertainty tends to raise term premia (investors demand more yield to hold longer maturities). On top of that, global moves nudged US yields up. The Treasury continues to run regular auctions, with this week's scheduled long-term auction announcements and routine bill auctions showing ordinary bidder interest.

Higher Treasury yields usually mean higher mortgage rates and slightly better returns on safe savings accounts. They also raise borrowing costs for companies and governments. If you're shopping for a mortgage, expect rates to track Treasury moves. If you hold long Treasury funds, prices fall when yields rise.

Fed Chair Jerome Powell spoke on Dec 1. His remarks emphasized the Fed's focus on bringing inflation to target while watching labor and financial conditions. No surprise policy shift — the Fed remains data dependent. Powell's steady message means markets still pin hopes on future cuts being conditional; mixed data left the market debating whether a December cut is priced in fully.

The latest available FOMC minutes (from the Oct meeting) remain the formal guide to the committee's thinking; Fed communication continues to highlight data dependence. No new rate-setting decision was made this week.

Fed comments and minutes are the main influence on rate expectations. When Fed officials sound cautious about cutting, long-term yields can drift up. Conversely, clear dovish signals typically push yields down and lift risk assets.

Investment-grade issuance has remained steady in 2025 overall; weekly new-issue calendars show ongoing activity as corporates take advantage of investor demand for yield, albeit issuance volumes vary week to week.

Investment-grade option-adjusted spreads remained relatively stable this week versus last, with occasional day-to-day widening as yields rose.

When IG spreads stay tight, it means investors are willing to lend to big companies at a modest premium over Treasuries — good for corporate bond investors. Rising Treasury yields, however, make new corporate bonds carry higher coupons (a plus for new buyers) but reduce prices of existing bonds.

The ICE BofA US High Yield Index OAS was around ~2.88% (288 bps) late in the week — a touch tighter from earlier small spikes. That level is higher than mid-year lows but still below stress extremes.

Activity in the high-yield and leveraged loan market remains selective. Investors have been especially discerning about lower-quality issuers; pockets tied to specific industries have shown divergence in performance.

High-yield yields remain attractive for yield-seeking investors, but credit selection matters. Spreads can widen quickly for weaker credits if economic stress appears.

No major, widely reported muni events dominated the headlines this week. If you hold munis: watch local issuance calendars and state revenue updates; munis can be sensitive to rising Treasury yields because they compete with taxable bonds for investor dollars.

This week: No single, large, market-moving upgrade/downgrade dominated the headlines across Moody's/S&P/Fitch in the past seven days for broad US credit sectors. (If you follow a particular issuer or sector, check each agency's daily feed.)

Rating changes can make some bonds suddenly more or less risky. Big downgrades increase borrowing costs for affected issuers and can hurt bond prices.

Banks and major strategists flagged that markets are now splitting hairs over the timing of Fed easing; some strategists expect a first cut soon but not necessarily beyond that, while others caution that resilient data could delay further cuts into 2026.

Large firms tend to highlight probabilities (e.g., X% chance of a December cut). For ordinary investors, that translates into whether fixed-income allocations should be tilted to take advantage of higher short-term yields or to lock in longer yields now.

Several outlets reported this week that the Treasury market's weekly performance was weak (higher yields), which raises borrowing costs across the economy. Reuters provided regular market wrap pieces highlighting day-to-day moves and drivers like claims data and Fed-watch.

Yields were rising and somewhat volatile this week — the 10-year climbed to roughly 4.1%–4.14% while the 30-year moved toward the high-4s. Investment-grade spreads were steady; high-yield spreads tightened modestly from recent bouts of widening but remain above their tightest 2025 levels. That indicates investors still demand compensation for lower-quality debt, but outright panic is not present.

Traders are focused on the Fed's next moves and the still-thin data set for November (jobs delay), which makes every economic surprise more influential. The market's confidence in a smooth path for Fed easing is cautious, so yields can move quickly on any new headline.

Key data: Keep an eye on any delayed labor-market releases and the upcoming inflation prints (PCE/CPI windows depending on the calendar). Treasury auctions: Watch the Treasury auction schedule for any mid-to-long term sales that can absorb supply. Fed commentary / speeches: Any fresh Fed speeches or official comments will matter—Powell and other voting members are in focus. Corporate issuance windows: If big IG or HY supply hits the market, keep an eye — heavy issuance during rising-yield periods can pressure corporate bond prices and widen spreads.

These items determine whether yields keep climbing (bad for bond prices, higher mortgage/loan rates) or retreat (friendly for bond prices and credit). If you're a saver, rising short-term yields can be a good thing; if you hold long bonds, rising yields hurt prices.