January began with a stronger-than-expected employment report, which showed job gains of 265,000, the largest increase since March 2024. The upside surprise led to an initial move higher in yields to start the month. Broader economic data released throughout the month painted a picture of a resilient economy—real GDP grew at an annualized rate of 2.3% in the fourth quarter, while the labor market appeared to stabilize, with the unemployment rate ticking down to 4.1%.

The fourth quarter opened with a stronger-than-expected jobs report (+254k) and accelerating inflation in both CPI and PCE, dampening expectations for aggressive Fed policy easing. Additionally, the fourth quarter saw market sentiment shift in response to the increased likelihood and, ultimately, confirmation of a 'red sweep' in the US elections.

As the calendar turned to the second half of the year, markets remained laser-focused on the timing and magnitude of the impending Fed easing cycle. Inflation and employment figures released in Q3 supported the idea that the Fed would begin to cut rates soon.

The second quarter began with a stronger than forecast employment report, indicating solid job gains and revisions upward for previous months. Additionally, the April 10th release of the March CPI came in above forecast at 3.5% and continued a string of higher-than-expected data.

While APA looked to extend duration across strategies for much of 2023, with ratios on the rich side of historical averages to start the year, and the fixed-income markets being well ahead of Fed messaging for rate cut expectations for much of the start of 2024, we remained more selective on duration extension trades to start the year.

After starting the quarter with yields moving higher through October, market sentiment shifted sharply in November on softer-than-expected inflation readings (though notably still above target) and a seemingly more dovish Federal Reserve.

July saw the municipal market outperform Treasuries for the third consecutive month, which was attributable to the supply/demand dynamics of the tax-exempt market.

Municipals diverged from Treasuries in April, as Treasury yields moved modestly lower, while AAA muni yields moved higher by between 7-51 bps for the month.

The municipal market started the year with prices moving higher as the seasonal supply/demand imbalance known as the “January effect” took hold.

October was the third consecutive month of higher yields, as the 2, 5, 10, and 30‐yr AAA muni spots rose by 9, 12, 9, and 22 bps, respectively.

The quarter began with yields moving lower, as July saw municipals post the best month of performance for the year.

The quarter began with yields moving sharply higher in April as the market priced‐in a hawkish Fed in response to inflation concerns. For the month, the 10‐year UST yield adjusted upward by 57 bps.

The year started with FOMC members taking a hawkish pivot and clearly signaling an intent to Ɵghten policy to slow down inflation.