Duration Dashboard

The week's bear-flattening dynamic captured two competing forces. On the front end, Tuesday's March retail sales print of +1.7% (above consensus of +1.4%) and Thursday's S&P Global flash composite PMI at 52.0 (versus 50.6 expected) prompted markets to further reduce the probability of any 2026 Fed rate cuts, with futures-implied pricing now consistent with one or zero cuts through year-end. On the long end, the 30-year's modest 2-basis-point rise reflected partial absorption of the oil-driven inflation impulse already embedded in term premium, alongside the week's 20-year reopening which cleared amid the broader long-end repricing. Friday brought a modest relief rally as front-end yields fell on the Powell probe news, narrowing the week's net move at the 2-year. Our prior week's Duration & Credit Pulse on the March nonfarm payrolls and continued oil shock documented the early stages of this hawkish repricing.

Credit Pulse

Credit spreads widened modestly with high yield adding 10 basis points to 260 — interrupting three consecutive weeks of tightening — while investment grade was nearly unchanged at 75 bp. Both metrics remain at the tighter end of their five-year ranges (16th and 24th percentile, respectively), reflecting strong Q1 earnings momentum, fallen-angel rates near multi-decade lows, and continued institutional appetite for yield. Notable IG primary issuance included AT&T's $6 billion five-part deal priced April 23, with tranches at 4.750% (2033), 5.250% (2036), 5.850% (2046), 6.200% (2056), and 6.300% (2066) — the longest tranche capturing the elevated long-end Treasury environment. The high yield primary calendar saw a notable supply uptick mid-week, consistent with issuers taking advantage of compressed spread levels before the FOMC meeting.

Federal Reserve Policy Outlook for Treasury Yields in April 2026

The Federal Reserve entered its pre-FOMC blackout period during the week, with the only public appearance being Governor Waller's Tuesday Brookings remarks on operational reform, which by design did not address monetary policy. Markets enter the April 28–29 meeting pricing approximately a 98% probability of an unchanged target range at 3.50–3.75%, with futures-implied pricing now consistent with one or zero cuts through year-end — a notable shift from the two-cut pricing visible as recently as early March. The Committee will release an updated Summary of Economic Projections on April 29.

Friday's news that the Department of Justice dropped its probe of Chair Powell carried meaningful market implications by clearing the procedural path for the Senate to advance Kevin Warsh's confirmation as Chair, with Powell's term expiring in May. Front-end yields rallied on the news as markets weighed the leadership transition. The analytical framework heading into the meeting was set the prior week by speeches given before the blackout — including New York Fed President John Williams' April 16 remarks attributing 0.5–0.75 percentage point of recent PCE inflation to tariffs, and Governor Waller's April 17 comments on labor force dynamics — both of which inform expectations for next week's policy statement and dot plot revisions.

Week Ahead: FOMC Decision Will Drive Treasury Yields in April 2026

• FOMC Decision (April 29): Expected unchanged at 3.50–3.75%. Markets will focus on the updated Summary of Economic Projections, particularly any dot plot revisions and revised inflation forecasts that account for recent oil prices and tariff dynamics. Powell's press conference will be closely parsed for signals on the bar for any 2026 cut.
• Q1 2026 GDP Advance Estimate (April 30): First read on the quarter that captured the early stages of the Hormuz disruption. Any meaningful downside surprise relative to the Atlanta Fed GDPNow tracking would reinforce the soft-data narrative seen in consumer sentiment.
• Core PCE for March (April 30): The Fed's preferred inflation measure. A core reading at or above 0.3% month-over-month would further reduce the probability of any 2026 cuts and pressure the front end.
• Treasury Auctions (April 27–28): $69B 2-year, $70B 5-year, $44B 7-year notes plus 2-year FRN. Demand metrics (bid-to-cover, indirect bidder share) will indicate whether the recent rise in yields has restored institutional appetite at the front end.
• April Nonfarm Payrolls (May 1): Following the strong March print, consensus will likely cluster around continued moderate gains. Any meaningful upside surprise would extend the front-end repricing seen this week.

US Economic Positioning and Global Context

Global central banks navigated the eighth week of Strait of Hormuz disruption — now operating under a U.S.-Iran ceasefire that President Trump extended indefinitely on April 21 — with notable divergence in approach. The People's Bank of China held the 1-year Loan Prime Rate at 3.0% and the 5-year at 3.5% for the eleventh consecutive month, despite Q1 GDP printing at 5.0% year-over-year. ECB President Lagarde, speaking in Berlin on April 20, characterized the Strait of Hormuz disruption as among the largest oil supply shocks in history and reiterated the ECB's commitment to its 2% mandate, while signaling the central bank is not yet ready to alter course pending greater clarity on the duration of the disruption and its pass-through to broader inflation. The ECB is widely expected to hold at 2.00% at its April 30 meeting. The Bank of Japan, which meets April 27–28, is expected to hold at 0.75%, with Governor Ueda having recently cooled near-term hike expectations.

Dollar strength returns as ceasefire fragility persists: The DXY dollar index closed near 98.5, posting its first weekly gain in three weeks as geopolitical risk and the relative-rates story supported the currency. Crude oil rose roughly 13–18% on the week, with Brent trading in the $105–107 range and WTI near $94, pushing year-to-date 2026 gains for Brent above 70%. Despite the formal ceasefire, the week brought tangible escalation signals — the Iranian Revolutionary Guard Corps detained two foreign-flagged container ships in the Strait of Hormuz on April 22, and on April 23 President Trump issued a public directive to the U.S. Navy authorizing forceful response to any vessel observed laying mines in the strait. These developments underscored that the naval blockade and underlying tensions remain unresolved even with active hostilities paused. Gold consolidated near record highs around $4,720/oz after touching $4,763 on April 21. The fiscal channel also re-emerged this week with Customs and Border Protection's launch of the CAPE tariff refund portal on April 20, addressing a government liability of approximately $166 billion across roughly 53 million entries from over 330,000 importers following the Supreme Court's IEEPA ruling. Our earlier coverage of the IEEPA ruling and its fiscal implications discussed the longer-term term-premium impact, which remains visible in the 30-year's percentile reading.