Although inflation has come down from its peak, it hasn’t fully gone away, and we continue to feel the effects of that uncertainty in the bond market.

Forces Shaping Today’s Bond Market 

Starting with Treasuries, they remain highly sensitive to inflation expectations and Federal Reserve policy. When inflation comes in hot, yields move higher as investors demand more returns. That volatility tells us that the market isn’t fully convinced inflation is under control.

Layering the ongoing conflict in the Middle East, tensions involving Iran, and rising oil prices has brought inflation risk back into focus, shifting the market narrative toward renewed inflation concerns and reinforcing a more cautious Fed outlook.

With municipal (muni) bonds, the market has gone through a bit of a round trip. Yields started the year lower alongside Treasuries, but in March we saw a sharp sell-off as rates moved higher, paired with the new issuance and fund outflows. Although there’s a bit of a steady amount of supply, flows have been a bit uneven lately, as investors remain cautious on where yields are going to land in the near future.

Short-term bonds have held up well. However, they don’t look as attractive. The middle part of the market offers a bit more value.

On the Corporate Side

Investment-grade bonds have had a volatile but resilient quarter. They started strong but sold off in March as rates moved higher.

Since then, demand has stayed strong, and new deals have generally been well received. So, while these bonds did lack Treasuries during the sell-off, it was really driven by interest rates and not concerns about credit. The overall fundamentals remain solid.

Stepping back across Treasuries, munis, and corporates, the common theme is uncertainty around inflation and interest rates. Treasuries are reacting faster, munis have been more stable with better entry points, and corporate bonds are holding in well—even if some risks around tighter spreads, as we’ve seen historic lows, leave very little room for error with very little cushion.

Conclusion

The broader takeaway is that while inflation may not be surging like before, it is still shaping market behavior in a meaningful way. And while short-term volatility around geopolitical events is normal, until we get more clarity from inflation, the Fed, and global events, volatility is likely here to stay. And in this kind of environment, having a well-structured ladder is key. Helping investors navigate uncertainty while managing reinvestment and interest rate risk continues to be the most prudent approach for the market.

If you have questions about anything covered in this video, please don’t hesitate to reach out to your advisor.

The information provided is educational and general in nature and is not intended to be, nor should it be construed as, specific investment, tax, or legal advice. Individuals should seek advice from their wealth advisor or other advisors before undertaking actions in response to the matters discussed. No client or prospective should assume the above information serves as the receipt of, or substitute for, personalized individual advice. This reflects the opinions of Focus or its representatives, may contain forward-looking statements, and presents information that may change. Nothing contained in this communication may be relied upon as a guarantee, promise, assurance, or representation as to the future. Market conditions can vary widely over time, and certain market and economic events having a positive impact on performance may not repeat themselves. Investing involves risk, including, but not limited to, loss of principal. Focus’ opinions may change over time due to market conditions and other factors. Numerous representatives of Focus may provide investment philosophies, strategies, or market opinions that vary. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Please be advised that Focus only shares video and content through our website or other official sources. Services and investment advice are only provided pursuant to an advisory agreement with the client. Services are offered through Focus Partners Advisor Solutions, LLC and Focus Partners Wealth, LLC (collectively referred to in this document as “Focus”), SEC registered investment advisers. Registration with the SEC does not imply a certain level of skill or training and does not imply that the SEC has endorsed or approved the qualifications of the RIAs or their representatives. ©2026 Focus Financial Partners, LLC. All rights reserved. RO-26-5430706