Week Ending: June 19, 2026

Less Is More

In response to almost every situation, a beloved colleague is fond of saying, “Less is more.” Newly minted Fed Chair Kevin Warsh seems to have embraced a similar mantra. The June FOMC meeting statement featured just 114 words, down from 244 in the April statement and closer in length to statements during the Greenspan regime. The shift could presage a style that elevates brevity, reduces the frequency of Fed communication, and the information available. But we’ll have to see. Aside from taking a red pen to the statement, Warsh announced five “task forces” to study Fed communication and other topics before recommending changes. Zooming out, the trend of loquaciousness peaked between Bernanke and Yellen at the Fed. But that talkative Fed may have been a victim of circumstance. At that time, the fed funds rate was stuck at zero, with the economy in a low gear and inflation sub-target: talking was a tool. Today, the economy is resilient, and inflation is sticky. Does the Fed need to do less spoon-feeding—and should we expect more volatility in markets as a result?

Highlights of the Week:

High Yield: First-quarter earnings are in, and high-yield fundamentals remain sound. Leverage ratios edged higher, and interest coverage has compressed modestly, but both measures remain healthy overall. Stable credit fundamentals should provide investors a margin of safety if macroeconomic factors deteriorate.

Corporates: This week saw $43 billion in new-issue supply for investment-grade (IG) markets ahead of the holiday weekend. Year-to-date supply stands at $1.1 trillion, up 29% from the same time last year. Despite volatile rate moves this week, IG spreads have remained steady at an option-adjusted spread (OAS) of 73 basis points (bps), trading in a 1bp range between 72 and 73 since May 22nd.

Municipals: On May 14th, California Governor Newsom released his revised FY 2026-27 budget, projecting a balanced state budget through July 2028, with revenues coming in $16.8 billion above January estimates, driven largely by AI-related capital gains. The California Legislature passed its own budget by the June 15th constitutional deadline, assuming roughly $5 billion more in revenue and supporting additional spending. Negotiations between the two sides will continue through June ahead of the July 1st start of the fiscal year.

Equities: U.S. equities closed the week higher, driven by ongoing momentum in AI-related and semiconductor names alongside easing geopolitical concerns following a U.S.-Iran peace deal. Sector performance remained notably bifurcated, with Industrials and Technology gaining more than 3%, while Energy and Health Care fell more than 3%, reflecting a continued divergence in market leadership.

Securitized Products: Despite record post-global financial crisis (GFC) origination and issuance, market dynamics in the residential non-qualified mortgage space remain strong. Demand, driven by insurance and money managers, has risen to meet supply, and spreads remain near historical tights. Lender credit standards are stable, with volume increases driven by greater market education and penetration.