Week Ending: July 03, 2026
Wage Watch
Data this week showed U.S. job growth averaged a solid 111,000 per month over the three months ending in June, nudging the unemployment rate down to 4.2%. With the labor market stabilized and core inflation still sticky, policymakers are on the lookout for a wage growth reacceleration that would let businesses pass higher prices on to consumers. On the surface, there's cause for concern: average hourly earnings ticked up to 3.5% year-over-year in June from 3.4% in May. Is wage growth accelerating? Probably not. Monthly noise may be at work—leisure and hospitality employment sank in June, tilting the composition toward higher-paying jobs—and a composition-adjusted measure, which fixes industry weights to 2019 to strip out volatility from employment shifts, is still cooling. That said, wage growth remains above its pre-pandemic average, and a few sectors—leisure & hospitality, healthcare & education, and manufacturing—are driving most of the cooling. As we celebrate the 250th anniversary of independence, fireworks celebrating wage growth normalization will have to wait.
Highlights of the Week:
High Yield: The U.S. has generated a net goal differential of eight goals so far in this World Cup, which is close to the high yield index yield of 7%. Will America's goal yield persist? Will long-term high yield investors realize returns in line with their starting yields? We know what we're rooting for.
Corporates: Companies tapped the market for $203 billion in June, the busiest June on record, driven by an increase in AI-related debt from companies like Nvidia and SpaceX. With the help of the AI buildout, the first half of 2026 saw a record total issuance of $1.2 trillion.
Municipals: Municipal bonds outperformed most fixed-income sectors in June, as technical conditions remained highly supportive despite record issuance. The Bloomberg Investment Grade Municipal Index returned 0.96%, Taxable Municipals gained 0.64%, and High Yield Municipals rose 1.33%. Strong demand helped municipal yields outperform Treasuries across much of the curve, even as supply remained near record levels.
Equities: The U.S. equity market remained resilient this week, posting gains despite a rotation out of recent technology leaders. Sector performance was mixed, with strength in health care, consumer discretionary, and financials more than offsetting weakness in energy, industrials, and utilities.
Securitized Products: Nearly $5 billion of commercial mortgage-backed security (CMBS) and commercial real estate (CRE) collateralized loan obligation (CLO) issuance was priced this holiday week, pushing total issuance in the first half of 2026 to $99 billion, up 29% from last year. Demand remained red-hot, with a BBB tranche in EQT's industrial issuance seeing 51x oversubscription.
