Taking It Easy

Yet one market consistently set itself apart: U.S. Treasuries, which managed to finish the month modestly lower in yield even as Bunds, Gilts, and JGBs drifted slightly higher. The true narrative, however, centered on the evolution of expectations around the Federal Reserve—where conviction, hesitation, and ultimately clarity unfolded in rapid succession.

Outside the U.S., markets behaved like they were catching their breath. Most developed-market curves nudged higher in yield, reflecting localized supply dynamics and steady central-bank communication rather than any major macro shock. In contrast, Treasuries quietly reclaimed the leadership position within G7 rates, supported by a month that began with confidence in a December Fed cut, detoured into doubt as data went dark, and ended with a decisive turn once the backlog of indicators finally arrived.

The path of Fed expectations shaped the entire month. Early November opened with a mildly dovish tone, and markets priced a December cut with confidence as softer labor trends and steady disinflation kept the late-cycle narrative intact. But the U.S. government shutdown abruptly halted the release of more than a dozen key indicators—from CPI and payrolls to retail sales and PCE—creating a rare data vacuum. In the absence of hard evidence confirming further cooling, investors grew increasingly cautious; cut probabilities dropped below 30%, and Treasury yields hovered near local highs.¹

Everything shifted once the shutdown ended. As agencies released clusters of delayed data, the macro picture snapped back into focus. Across labor, consumption, activity, housing, and prices, the message was consistent: the economy was cooling in an orderly manner and inflation continued to soften. No single release turned the tide, but the cumulative weight of the information restored conviction. Within days, December cut odds surged back into the 80s, forward rate expectations eased, and the 10-year Treasury rallied toward 4.00%.

In retrospect, November was defined less by large market moves than by the transition it marked. After weeks of trading on partial information, investors finally received the confirmation needed to lean into a more accommodative policy path. By month-end, the market was prepared not just for a December cut, but for the broader easing cycle expected to carry into 2026.

Corporate Credit: Corporate credit delivered a varied month; Investment Grade (IG) spreads widened on elevated supply and softer sentiment, high yield retraced early volatility supported by net negative supply, and convertibles underperformed as thematic risk-off tone weighed on equity-linked structures even as issuance remained strong.

Securitized Products: Agency Mortgage-Backed Securities (MBS) spreads held steady at historically wide levels, while securitized credit modestly outperformed on stronger carry and steady fundamentals across Residential MBS, Asset-Backed Securities (ABS), and higher-quality Commercial MBS.²

Municipal Bonds (Taxable and Tax-Exempt): Taxable municipals posted solid results in line with broader high-quality fixed income, supported by constructive technicals and stable credit conditions, while tax-exempts lagged after an extended period of outperformance.

^{RISK CONSIDERATIONS
Diversification neither assures a profit nor guarantees against loss in a declining market.}

^{There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline and that the value of portfolio shares may therefore be less than what you paid for them. Market values can change daily due to economic and other events (e.g., natural disasters, health crises, terrorism, conflicts, and social unrest) that affect markets, countries, companies, or governments. It is difficult to predict the timing, duration, and potential adverse effects (e.g., portfolio liquidity) of events. Accordingly, you can lose money investing in a portfolio. Fixed-income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In a rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. In a declining interest-rate environment, the portfolio may generate less income. Longer-term securities may be more sensitive to interest rate changes. Certain U.S. government securities purchased by the strategy, such as those issued by Fannie Mae and Freddie Mac, are not backed by the full faith and credit of the U.S. It is possible that these issuers will not have the funds to meet their payment obligations in the future. Public bank loans are subject to liquidity risk and the credit risks of lower-rated securities. High-yield securities (junk bonds) are lower-rated securities that may have a higher degree of credit and liquidity risk. Sovereign debt securities are subject to default risk. Mortgage- and asset-backed securities are sensitive to early prepayment risk and a higher risk of default and may be hard to value and difficult to sell (liquidity risk). They are also subject to credit, market, and interest rate risks. The currency market is highly volatile. Prices in these markets are influenced by, among other things, changing supply and demand for a particular currency; trade; fiscal, money and domestic or foreign exchange control programs and policies; and changes in domestic and foreign interest rates. Investments in foreign markets entail special risks such as currency, political, economic and market risks. The risks of investing in emerging market countries are greater than the risks generally associated with foreign investments. Derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, and correlation and market risks. Restricted and illiquid securities may be more difficult to sell and value than publicly traded securities (liquidity risk). Due to the possibility that prepayments will alter the cash flows on collateralized mortgage obligations (CMOs), it is not possible to determine in advance their final maturity date or average life. In addition, if the collateral securing the CMOs or any third-party guarantees are insufficient to make payments, the portfolio could sustain a loss.}