Fixed Income Monitor · October 2026

Treasuries and CCC Credits Are Repricing. Most Other Credits Have Not.

Each month I place yields and credit spreads against their own daily history since January 2000, work out what municipal bonds are worth after tax, and set out what I am advising, with the strongest case against each view.

Data as of 30 October 2026 close (October month-end), compared with 30 September 2026By Tim O’Mara, CFA, Managing Partner and Chief Investment Officer
The six measures

Where the market closed October

Percentile = share of daily observations since January 2000 below the reading, ties counted as half; the municipal ratio is ranked against daily data since October 2023. Source: FactSet; Federal Reserve H.15; ICE BofA indices; ICE AAA municipal curve.

My view this month

October gave back part of September

Where markets stand

The 10-year Treasury yield, 5.29% at the end of September, closed at 5.31% on 5 October, its highest close since May 2002, then fell to finish the month at 4.94% (30 October close), its lowest close of the month and 35 basis points lower. Real yields did the moving; inflation expectations held near 2.35%. The 10-year closed above 5% on 15 of October’s 21 trading days, and the October month-end is still higher than any month-end from mid-2007 until this September. The safest long-maturity asset still pays a real return of 2.6%.

What has and has not changed

Investment grade corporate bonds pay 94 basis points over Treasuries of comparable maturity while high yield pays 344 basis points over, both still in the bottom quarter of daily history since 2000 (19th and 22nd percentiles). But the direction turned in October: high yield spreads finished the month at 344 basis points, 32 basis points wider than September. Most notably, the weakest borrowers widened most. CCC-rated bonds widened 148 basis points in the month to 1,327 over comparable Treasuries, wider than on 81% of days since 2000. The market has started to charge for the risk at the bottom while still charging little in the middle. I expect the middle to follow.

Where the strain shows

Securitized commercial real estate loans (CMBS) are 8% delinquent, 12% for offices, and $875 billion of property loans mature in 2026. Loans to the weakest companies are concentrated in the 2027 and 2028 maturities. Mortgage delinquencies are rising from low levels, and the personal saving rate has fallen to 3.8%. None of this is a crisis; all of it may be the early part of a cycle, and October’s widening at the bottom of the credit market is what that early part tends to look like.

What I am advising

Overweight short Treasuries (under three years) and inflation-protected Treasuries. For taxable accounts at the 24% bracket and above, municipal bonds are the vehicle for whatever maturity you hold: after tax, A-rated municipal bonds out-yield A-rated corporates by 0.4 to 1.1 points (24% to 37% brackets). It is too early to extend into long municipals. I am neutral on government-backed mortgage bonds and on direct lending, where I advise holding but not adding. I advise being underweight investment grade corporate bonds, which pay the least for their risk, and underweight high yield, where I expect spreads to widen further. The full table is below.

Rates

Yields near the top of their range, the curve still upward sloping

Exhibit 1

Treasury and AAA municipal yield curves, 30 October 2026 (percent)

TreasuryAAA municipal

Source: FactSet; Federal Reserve H.15 constant maturity Treasury yields; ICE AAA municipal curve. Daily close, 30 Oct 2026.

Exhibit 2

Municipal yields as a share of Treasuries and taxable-equivalent yield at the top bracket

Taxable-equivalent yield (TEY) = tax-exempt yield ÷ (1 − 40.8%), the 37% federal bracket plus the 3.8% net investment income tax. Ratio = AAA municipal yield ÷ Treasury yield of the same maturity.

Against history

Every measure against its own range since 2000

Each bar runs from the lowest daily reading since January 2000 (red) to the highest (green). The short tick is the average; the dot is 30 October 2026, green where buyers are well paid for the risk, red where they are paid little, amber for CCC.

Exhibit 4

Spread over Treasuries of comparable maturity, weekly since January 2000 (basis points)

Source: FactSet, ICE BofA US Corporate (C0A0), US High Yield (H0A0) and CCC and Lower (H0A3) indices, option-adjusted spread; last daily reading of each week, 7 Jan 2000 to 30 Oct 2026, every week shown (no trim). Hover or tap the chart for values.

Municipals

After tax, A-rated municipals out-yield A-rated corporates at every bracket from 24%

Municipal bonds pay interest that is free of federal income tax, so what a municipal yield is worth depends on your bracket. Pick yours to compare what each bond keeps after federal tax.

Exhibit 5

After-tax yield by federal bracket, 30 October 2026 (percent)

Taxable yields are reduced by the marginal federal rate (bracket plus the 3.8% net investment income tax, which applies above $200,000 single or $250,000 joint income and is not indexed; many 24% filers fall below it). The high yield row is also reduced by expected annual credit loss of 1.60% (Moody’s 10-year cumulative default rate, annualized, times one minus recovery); investment grade rows carry no expected-loss deduction. Florida resident; state tax would widen the municipal advantage for residents of taxing states holding in-state bonds. Yields to worst. Source: FactSet; ICE BofA indices; ICE AAA municipal curve; Federal Reserve H.15.

Exhibit 6

After-tax advantage of A-rated municipals over A-rated corporates at the top bracket (percentage points)

30 Oct 2026: 1.10 points · average since 2000: 1.18

A-rated municipal index yield minus A-rated corporate index yield after 40.8% federal tax. Last daily reading of each week, January 2000 to 30 Oct 2026. Positive on all but 12 trading days since 2000; average 1.18 (dashed); 1.10 at 30 Oct 2026 and 1.43 at 30 Sep 2026. Source: FactSet, ICE BofA US Municipal Single-A (U0A3) and US Corporate Single-A (C0A3) indices, yield to worst.

How I would build a municipal portfolio

An average credit rating of A, with no more than 10% to 20% of the portfolio in issues rated below A-. Over ten years, A-rated municipal bonds have defaulted at about one nineteenth the rate of A-rated corporate bonds (0.10% against 1.90%, Moody’s). Diversified by issuer, sector and state, centered on general obligation and essential-service revenue bonds. I consider municipals a core holding for U.S. investors with taxable fixed income, and I would not add beyond 10 years yet: longer maturities pay more after tax but carry well over twice the rate risk of a 10-year.

The refinancing wall

The wall is small; the trouble is concentrated at the bottom

The leveraged loan index holds $1,582 billion across 1,345 loans once 7 defaulted or near-zero-priced loans ($5.6 billion) are set aside. About 10% comes due by the end of 2028. CCC-rated loans are 7% of the market but 29% of what matures from 2026 to 2028, and 53% of their par in that window trades below 80 cents on the dollar.

Exhibit 7

Loan par by maturity year and rating ($ billions)

Source: Morningstar LSTA US Leveraged Loan Index constituents via FactSet, 30 Oct 2026, par outstanding, excluding loans rated D or priced below 10 ($5.6 billion). The full index is $1,588 billion across 1,352 loans.

Exhibit 8

Loans maturing 2026 to 2028, by rating

Trading below 80 = share of par priced below 80 cents on the dollar. Loan coupons are SOFR plus a margin that varies by borrower, so no single all-in yield is shown.

Consumer credit

Stress is rising where it starts: mortgages

Consumer data arrive a quarter late, so I read the direction, not the level. The share of mortgage balances falling seriously behind rose to 1.52% from 1.29% a year ago. Credit cards are the exception, with delinquencies and losses falling, but the saving rate has dropped from 5.1% to 3.8% in a year: households are staying current on cards by saving less.

Exhibit 9

Bank loan delinquency rates by type, 2000 to 2026 (percent of loans 30+ days past due)

Seasonally adjusted, all commercial banks, quarterly Q1 2000 to Q2 2026. Source: Federal Reserve via FactSet (FRED series DRCCLACBS, DRCLACBS, DRSFRMACBS, DRCRELEXFACBS, DRBLACBS). Mortgage flow figures: Federal Reserve Bank of New York, Household Debt and Credit, Q2 2026. Saving rate: Bureau of Economic Analysis, September 2026.

Where I stand

What I am advising, with the strongest case against each view

Three stances: Overweight, hold more than a normal allocation and add; Neutral, keep what you have and do not add; Underweight, hold less or none. These are general views for discussion, not recommendations for any individual portfolio.

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Methods

How the numbers are built

Month-end values are the last observation in the calendar month, never averages; the October month-end is the 30 October 2026 close. Spreads are option-adjusted spreads over Treasuries of comparable maturity in basis points (one basis point is one hundredth of 1%); yields are yield to worst in percent; duration is effective duration in years. Percentiles are the share of daily observations from 3 January 2000 to 30 October 2026 below the current reading, ties counted as half. Within 2007 to 2009, days more than two standard deviations from the full-period mean are excluded from ranges, averages and percentiles (for example 187 of 6,748 days for high yield); charts show every week. Treasury and TIPS yields are the Federal Reserve H.15 constant maturity series; index data are ICE BofA indices via FactSet. Taxable-equivalent yield divides a tax-exempt yield by one minus the marginal federal rate, the statutory bracket plus the 3.8% net investment income tax; no blended rates are used.

Index history is not like-for-like. The ICE BofA indices change their mix of ratings, maturities and sectors over time, so a spread, percentile or range measured against history since 2000 reflects changes in what each index holds as well as changes in pricing. A spread that ranks as tight against earlier years may partly reflect a higher-quality or shorter index today.