Week Ending: April 10, 2026

Core Exception

Data released this week showed that core Personal Consumption Expenditures (PCE) inflation has hovered near 3% for 27 consecutive months through February. But is core inflation stuck at 3%? One way to assess this is trimmed-mean PCE, which strips out the highest and lowest monthly readings to provide a cleaner gauge of underlying inflation. Unlike core, trimmed-mean PCE moderated to 2.3% in February, much closer to the Fed’s 2% target, and has historically been the more reliable signal when the two measures diverge. For example, in 2009, core PCE accelerated sharply but eventually slowed and converged with the trimmed-mean. Similarly, in 2015 and 2019, following core PCE would have sparked deflation fears, whereas the trimmed-mean measure was much more stable. In the post-Covid inflation spike, while trimmed-mean accelerated more slowly than core, it peaked lower and helped ease market concerns about further Fed tightening in 2023. Today, the gap between the two reflects idiosyncratic and seasonal shocks to inflation in goods and nonhousing services. With a weakening labor market and moderate wage growth, is core still the signal or just noise? We lay out the history—you decide.

Highlights of the Week:

High Yield: The recovery in high yield spreads continued this week. Spreads compressed by 27 basis points, driving total returns to 1.0% for the week and 2.2% since the market bottomed on March 27th. Timing the peaks and valleys of volatility in spreads is difficult, but long-term investors should benefit from current yields of nearly 7%

Corporates: The so-called "ceasefire" has opened the new issue market, with $36 billion of supply this week. With earnings kicking off in earnest next week, self-led issuance could drive another busy new-issue week, with expectations of roughly $35-40 billion.

Municipals: For the week ending April 8th, municipal funds recorded $866 million in inflows, led by exchange-traded funds (ETFs) at $789 million and modest open-end fund gains of $77 million. This marks a return to consecutive inflow weeks after a brief interruption in a 17-week streak. Year-to-date inflows total roughly $28.3 billion, the second-highest on record at this point.

Equities: U.S. equities ended the week higher for a second straight week, supported by growing optimism about easing geopolitical tensions, while corporate earnings expectations remain robust. Most sectors posted gains, led by communications, consumer discretionary, and industrials, while energy, consumer staples, and health care were the market laggards.

Securitized Products: Commercial mortgage-backed security (CMBS) issuance declined 25% month-over-month in March, primarily due to a pullback in floating-rate single-asset, single-borrower (SASB) supply following the onset of the Iran War. Since the conflict began, credit curves have diverged across product types, with conduit and commercial real estate collateralized loan obligation (CRE CLO) curves steepening while SASB curves have flattened. Additionally, spreads widened across the capital structure, with CRE CLO bonds 12–17 basis points (bps) wider, conduit 6–11 bps wider, and SASB 5–7 bps wider.