On the March 23, 2026, episode of The Morning Filter, David Sekera and Susan Dziubinski discussed the state of the US bond market today, why international fixed income is making headlines, and what the takeaways are for investors. Here is an excerpt from the show.
Struggling US Bond Market and Widening Credit Spreads
Susan Dziubinski: We’ve been talking a lot on The Morning Filter, of course, during the past few weeks about the war and oil prices and the stock market’s response, but there’s been some movement in the bond markets that we should be covering, too. Talk about where things stand in the US bond market today.
David Sekera: Generally, I would say the US bond market has been struggling year to date. The Morningstar US Core Bond Index has fallen just a half a percent. And really, it’s just due to interest rates rising across the curve. Just taking a look at the short-term rates. The two-year is up 40 basis points year to date, or at least year to date through last Friday. We’ll see where they go today. And to me, that also just kind of indicates that not only is the bond market really no longer pricing in a cut to the federal-funds rate, but that it’s now pricing in and actually a higher probability that the next move is going to be an increase to the federal-funds rate. The US Treasury had risen 20 basis points to 4.39%. We’ll see where that ends up today after all the machinations that we’re seeing pre-open.
I’d also just want to point out that corporate credit spreads have been widening as well. If we look at the Morningstar investment-grade and high-yield bond indexes, those are down 1% and eight-tenths of a percent, respectively. Year-to-date investment-grade spreads have widened by 9 basis points, and high-yield spreads have widened by 45 basis points. We might get a bit of a snap back today, but in my opinion, I think both still have further to widen. So, looking forward, thinking about what the impacts might be to the marketplace, overall, I don’t think the interest rates are high enough yet that they would be negatively affecting how people value stocks. If the 10-year were to get up to like 5%, then I’d actually start becoming much more concerned, but I think they can still rise further from here before it actually starts to impact equities.
Taking a look at the corporate bond market, the window to the new-issue market is still open, but I would say it’s probably not open for the more speculative purposes out there. I think those deals are probably going to get postponed for a while. Corporate credit spreads, while widening, aren’t necessarily wide enough to impact the general economy. High-yield spread as of last Friday was at 320. If it got up to 500, then I’d start becoming much more worried, but it’s not wide enough at this point and hasn’t widened enough yet that it would really impact the funding for the economy.
Risks to the Global Bond Market
Dziubinski: Talk a little bit about global bonds, Dave. What are the headlines on fixed income internationally?
Sekera: Just taking a look at European and government bond yields, through last Friday anyway, we’ll see where they trade today. But they’re pretty much all at the highest yields that I’ve seen since at least 2023, specifically looking at the developed European governments: France, Germany, Spain, Italy, and the UK. And I’d say that the reason their yields have moved up as much as they have is that I think those countries are more at risk to their economy from the higher energy costs coming from the conflict in the Middle East. The US, to some degree, is a little bit more insulated in that we are at least a net exporter of oil and gas. Otherwise, early this year, if you remember, we were talking a lot about Japan and Japanese government bonds; those interest rates are rising. Now, the 10-year rate in Japan is still only 2.64%.
On a nominal basis, it’s still really low, but that’s close to where it peaked out in January when we were highlighting the impact that it had on global markets. That’s the highest that yield has been since 1997. Similarly, we talked a lot about the 40-year Japanese government bond. It’s still below its January peak, but that one seems to be rising pretty fast as well. And then the Japanese yen, I still like to keep an eye on that one. Last I saw it trading in the 159 handle. That’s the weakest it has been since January. It’s pretty much the weakest it’s been, actually, since before I got in the business. I don’t think it’s been above 160 since the mid-1980s.
How Investors Should Be Thinking About Fixed Income
Dziubinski: Let’s take a step back. What would you say is the key takeaway or two here, Dave? What’s the bond market around the globe telling us, and what should investors be thinking about when it comes to fixed income?
Sekera: I would say what we’ve seen is that the higher oil prices are going to negatively impact global economies as those prices flow through the system. Now, typically, what you see in the markets is if you’re getting worried about the weak economy, you would reallocate out of equity and put that money into fixed income, which in turn should push bond prices up and interest rates down. That’s not what we’re seeing. We’re actually seeing interest rates rising. The question is, why is that occurring? So, a difficult question to give you an individual specific answer, but when I’m thinking about it, I think that the spike in oil is causing longer-term inflationary concerns to move higher. I think the developed-market deficits, which are already running at relatively high levels, probably limit the amount of fiscal policy that could be used to try and support those economies if the economy really does take much of a downturn.
And then lastly, when I look at the developed markets, all of them, debt/GDP is much higher now than it was prepandemic. I think that’s now also starting to add in some concerns about potential credit risk, especially among those countries that have the most indebted levels already.
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