Duration Dashboard

The week's curve action belied an active data and event calendar. Crude oil fell more than 6% on de-escalation reporting from the Strait of Hormuz, the ISM Services Prices index remained anchored at 70.7—matching March's reading and representing the highest sustained input-cost gauge in over four years—and April nonfarm payrolls came in roughly double consensus at +115,000. Each of these data points carried directional implications that largely cancelled at the curve level, leaving the 10-year a touch below where it began the week. The long-end outperformance is consistent with the easing of inflation pass-through expectations on the crude decline, with the duration-supportive coupon discipline embedded in the May 6 refunding announcement reinforcing the bid for the 10-year and 30-year sectors. Our prior week's report on the April FOMC meeting documented the unusual four-dissent vote that established the current policy backdrop; this week's data flow reinforced rather than challenged that hold-and-watch posture.

Credit Pulse

Credit markets displayed a bifurcated tone driven by sector-specific factors rather than aggregate risk appetite. Investment grade OAS tightened 2 basis points to 75 basis points—now at the 26th percentile of its five-year range—with hyperscaler and AI-capex issuers continuing to lead price action. AMD's Q1 results released after Tuesday's close delivered a roughly 20% weekly gain in the equity, reinforcing the credit-spread tightening trajectory for technology issuers whose investment-grade paper has begun trading more like high-quality A-rated than the BBB risk implied by leverage metrics alone. High yield OAS widened a marginal 2 basis points to 259 basis points, holding at the 14th percentile, with the widening concentrated in energy-sector names absorbing concession on the 6% crude price decline. BB-rated paper continued to outperform CCC-rated within high yield, consistent with the late-cycle quality bias that has defined 2026 flows. The VIX drifted 0.20 points higher to 17.19, remaining within its middle range as the S&P 500 advanced to a record 7,398.93 on a sixth consecutive weekly gain.

Federal Reserve Policy Outlook

The post-FOMC speaker tour following the April 28-29 meeting reinforced a wait-and-see posture across the Committee. Cleveland Fed President Beth Hammack published a written explanation of her dissent on May 1, citing broad-based inflation pressures and rising oil prices as upside risks that argued against including an easing bias in the post-meeting statement. New York Fed President John Williams, speaking on May 4 at the Cynosure Group symposium, characterized the policy stance as well-positioned to balance risks and projected PCE inflation near 3% in 2026 before returning to 2% in 2027 as tariff and energy effects fade. Chicago Fed President Goolsbee and SF Fed President Daly participated in the Hoover Monetary Policy Conference panels on May 8, with both emphasizing structural questions over tactical policy.

CME FedWatch pricing throughout the week implied a probability near 96% of a hold at the June 16-17 meeting, with negligible odds attached to either a cut or a hike. Market-implied pricing for the balance of 2026 has gradually shifted in a more hawkish direction since the April dissent vote, with the next-move bias drifting from cut toward hold-then-hike. The Senate Banking Committee advanced Kevin Warsh to a full Senate floor vote on April 29, and the floor consideration is expected during the week of May 11. Powell's term as Chair concludes May 15, with the transition representing the most significant Fed leadership change since 2018.

Week Ahead After Treasury Quarterly Refunding May 2026: April CPI Headlines

• 3-Year Note Auction (May 11): $58 billion auction at 1:00 PM ET. Demand metrics, particularly indirect bidder share, will set tone for the week's refunding cycle.
• April CPI (May 13): Consensus calls for headline at approximately 3.4% year-over-year and core at approximately 3.0%, with an upside skew given energy pass-through. Print becomes the dominant input to June FOMC pricing and the most consequential data release since the April employment report.
• 10-Year Note Auction (May 12) and 30-Year Bond (May 13): $42 billion and $25 billion respectively. The 30-year reopens with the yield near a five-year peak; demand will signal foreign appetite for duration at these levels.
• April PPI and Retail Sales (May 14): PPI provides a corroborating inflation read; retail sales after the consumer sentiment decline will reveal whether weak attitudes are translating to spending.
• Powell Transition and Warsh Confirmation (May 13-15): Senate floor vote on Warsh expected mid-week; Powell's term as Chair ends May 15. The handoff occurs against an active inflation backdrop, which will shape the new Chair's opening communications.

US Economic Positioning and Global Context

The US economy continues to occupy an unusual position in the global cycle—growth resilient enough to keep the Fed on hold, inflation persistent enough to keep the next-move bias drifting hawkish, and energy resources sufficient to convert the Iran disruption into a relative terms-of-trade advantage. European yields have moved meaningfully higher on the same oil shock, with the ECB facing a more challenging trade-off given the eurozone's energy-import dependency. Bond fund flow patterns through April have shown sustained demand for taxable fixed income, with institutional allocators using the elevated yield environment to lock in carry while maintaining a quality bias. Year-to-date IG issuance through April reached $1.014 trillion per SIFMA, up 28% year-over-year, with the calendar pace tracking toward potentially the largest annual figure since 2020.