Snapshot of the Fixed Income Landscape

by Drew O’Neil of Raymond James, 11/18/25

As we inch towards the end of the year, many investors are digesting the ground we have covered so far this year while looking forward to 2026. For many investors, this analysis may warrant some sort of portfolio rebalancing to ensure that overall asset-class exposure remains aligned with long-term financial goals. Year-to-date, equity markets (as measured by the S&P 500 Total Return Index) are higher by 15.8%. If you stretch the timeframe back to the start of 2024, equities are higher by 44.8%. The stock market has been on a tremendous run for the past few years. By comparison, bonds (as measured by the Bloomberg US Aggregate index) are higher by 6.7% year-to-date and up by 8.1% looking back to the beginning of 2024.

For a very simple illustration, if you assume that an investor has a 50/50 target allocation between stocks and bonds and started 2024 aligned to their target with $1,000,000 in each asset class, they would currently be over-allocated to equities by over $180,000 (using the index returns outlined above). Whatever your target allocation is as an investor, it was likely arrived at based on aligning and balancing long-term financial goals with personal risk tolerance. If you are $180,000 overallocated to equities, you are likely taking on more risk than originally intended and revisiting the overall structure of your portfolio with your financial advisor may be warranted.

As you eye potentially shifting some of the gains made in the equity market back over to fixed income in order to realign your portfolio, this commentary provides a snapshot of the current state of the fixed income market to highlight available yields and relative value. In the chart below, the purple line represents the Treasury curve, the gold line is the BBB corporate curve, and the dotted blue line is the AA municipal curve shown on a taxable-equivalent yield (TEY) basis. A few takeaways are noted below.

Treasuries

As would be expected given the inherent differences in credit risk, Treasury yields are lower than both corporate and municipal yields across the curve. For conservative investors who would prefer to not take on credit risk, Treasuries still offer compelling yields in the high-3% to high-4% range, which are relatively attractive yield levels compared to much of the past 10 to 15 years. Also note that for investors in high-income tax states, the TEY for Treasuries should be considered and can make them much more attractive. For example, a 3.70% yield for a California investor in the state’s top tax bracket (13.3%) translates to a TEY of 4.69%, which at 1-year is higher than the yield for BBB rated corporate bonds.

comparing yield curves

Corporates

Investment-grade corporate bonds continue to provide attractive yields, offering investors yields from the mid-4% range to nearly 6% on the long end of the curve. The short end of the curve is relatively flat and begins to steepen around the 3 to 4 year part of the curve, with the steepest part of the curve being the 4 to 10 year window. A steeper curve means that investors are being rewarded more (in terms of yield) for each additional year they extend out on the curve.