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UST yields edged higher amid mixed economic signals and ahead of key inflation data. 10Y yield rose 1bp to 4.16%, with 2Y up 1bp at 3.51% and 3Y steady around 3.53-3.56%. Yield curve steepened slightly as short-end gains outpaced long-end, reflecting Fed hawkish cut expectations and resilient growth outlook. Corp spreads tightened 1bp to 81bp, supported by solid earnings and demand for high yields despite new issuance. MBS held steady with current coupon spreads attractive near 5.20% yield, buoyed by lower vol and technical buying.​

Market absorbed Fed liquidity measures calming year-end funding pressures, limiting volatility. Equities dipped while USTs saw modest selling post-data, with 10Y testing 4.20% intraday before stabilizing. IG and HY credits retreated mildly but resilient income theme persists absent credit shock.​

Outlook favors front-end USTs on easing path to 3.0-3.5% fed funds, though persistent inflation caps yield drop. EM sovereigns offer value in longer-dated paper from Brazil, Peru amid macro outperformance. Curve likely stays steep on rising supply; focus intermediate duration, TIPS for inflation hedge. Credit favors high-quality issuers as spreads near tights, balancing duration risk with carry. Risks tilt to labor weakness spurring cuts, but sticky CPI may prolong higher-for-longer.