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UST yields rose amid Fed anticipation, with 10Y reaching 4.35%+20bp and 2Y at 4.10%+15bp, flattening the curve by 5bp as short-end lagged. IG credit spreads tightened 2bp to IG19, driven by strong demand for high-grade corporates amid stable macro data, while HY held at HY325 with energy sector outperformance. MBS lagged Treasuries by +3bp on prepay fears, but agency spreads narrowed slightly to +105bp over UST; CLOs saw robust issuance at SOFR+520bp, buoyed by levered loan recovery. JGB 10Y climbed to 1.05%+8bp on BoJ hike signals, supporting yen strength and regional yield lift. Swap spreads widened 1bp across 2Y-10Y tenors, reflecting bank hedging flows.​

Volatility ticked up modestly to VIX4.2 equivalent in rates options, but positioning remains long duration with CTAs neutral. IG new issuance priced tight at +110bp area, met solid coverage ratios >4x; EM external debt dipped -1bp to 420bp, led by LatAm sovereigns. Oil at $72/bbl capped inflation pass-through, aiding soft-landing narrative.

Outlook favors curve steepener trades as Fed cuts 25bp in Dec, targeting 3.75-4.00% fed funds by mid-2026; duration extension prudent below 4.20% 10Y, paired with IG over-weight vs barbell HY/MBS. Credit selection key—avoid cyclicals, favor tech/AI-linked issuers amid capex boom. Risks tilt to hawkish Powell rhetoric sparking 10Y spike to 4.50%, prompting tactical short-end roll-down. Risk-reward skews positive for 6-12M horizon, with total return potential +4-6% on benchmark portfolios.