Last week’s four-day trading schedule, shortened by the MLK holiday, delivered no shortage of market-moving developments. By Tuesday’s open, global risk sentiment had deteriorated following a sharp selloff in Japanese Government Bonds amid renewed fiscal concerns, which cast a broadly bearish tone across global markets. Coupled with comments from President Trump regarding the potential annexation of Greenland, the 10-year U.S. Treasury yield broke through resistance to reach 4.30%, while the S&P 500 fell more than 2%.
Geopolitical tensions, high-profile speeches at Davos, the pending Supreme Court decision on tariff authority, and uncertainty surrounding the announcement of the next Fed Chair all contributed to heightened volatility. Collectively, these factors added to investor unease. However, if markets follow the pattern of the past year, any meaningful downside pressure may prove short-lived. Despite this, I continue to favor a bearish outlook on U.S. rates given the unsettled geopolitical landscape and persistent concerns about a renewed “Sell America” narrative.
Resistance becomes support. As you may recall from the prior commentary, a number of technical factors involving moving averages, an inverse head & shoulders pattern, and a break above long-standing resistance levels around 4.20% all suggested that in the near-term, higher rates may come into play. After last week’s press higher, the 4.23% level lines up with the 200-day SMA and now offers some near-term support. The market closed on Friday very close to technical support. As a trader, one knows where one is wrong with a short position should rates rally.
By week’s end, market sentiment recovered as President Trump tempered his comments on Greenland and withdrew plans for February 1st tariffs. Meanwhile, gold extended its ascent toward $5,000, underscoring ongoing Treasury weakness as capital continues to rotate away from dollar-denominated assets, a notable trend among central banks and institutional investors.
Looking ahead, the arrival of a major arctic storm - which should have arrived by the time this commentary is distributed - is expected to deliver severe winter conditions across much of the country. Airlines issued widespread cancellations even prior to the weekend. The impact may be especially significant in Texas and other Sunbelt states unaccustomed to such weather. The economic fallout, and any drag on GDP, will be important to monitor, as prior storms have strained power grids, disrupted business activity, damaged crops, impacted hourly workers, and contributed to supply chain stress. It would not be surprising if total economic implications ultimately reach the high nine-figure range.
From the Municipal Trading Desk (with contributions from Ryan Riffe):
The municipal market began the week by following the selloff in Treasuries, with MMD yields rising by as much as seven basis points. The rise in rates looked to continue into Wednesday morning until President Trump eased trade tensions by reversing comments regarding European tariffs. Municipals joined the rebound in equities and Treasuries, recovering nearly all the early morning losses. Thursday brought a reprieve to the intra-day volatility as geopolitical noise remained quiet and long-end JGBs (Japanese Gov't Bonds) stabilized from Tuesday's rout. Elevated background noise and uncertainty have made the municipal market ready to move at a moment’s notice; thus, we believe there is strong potential for more volatility in the near term. Fortunately, the municipal market will see the new issue calendar drop to just $3 billion in weekly supply (down from $11+ billion). Adding to the support will be February's reinvestment capital, which should provide the market with a measurable backstop.
30-Day Visible Supply @ $7.2 Billion
Weekly Supply @ $3 Billion
2-YR Ratio @ 61%
3-YR Ratio @ 60%
5-YR Ratio @ 59%
10-YR Ratio @ 63%
30-YR Ratio @ 88%
An index is unmanaged and not available for direct investment. Definitions sourced from Bloomberg.
The Bloomberg Barclays Global Aggregate Negative Yielding Debt Market Value Index represents the portion of the Bloomberg Barclays Global Aggregate Index that measures the aggregate value of global debt with a negative yield. • The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. • The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.• The Cboe Volatility Index® (VIX) is a calculation designed to produce a measure of constant, 30-day expected volatility of the US stock market, derived from real-time, mid-quote prices of weekly S&P 500® Index (SPX) call and put options with a range of 23 to 37 days to expiration.• The ICE BofA MOVE Index is a yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of implied volatilities on the CT2 (Current 2 Year Government Note), CT5 (Current 5 Year Government Note), CT10 (Current 10 Year Government Note), and CT30 (Current 30 Year Government Note), with weights 0.2/0.2/0.4/0.2 respectively.• The Markit CDX North America Investment Grade Index is composed of 125 equally weighted credit default swaps on investment grade entities, distributed among 6 sub-indices: High Volatility, Consumer, Energy, Financial, Industrial, and Technology, Media & Tele-communications. Markit CDX indices roll every 6 months in March & September. • The Markit CDX North America High Yield Index is composed of 100 non-investment grade entities, distributed among 2 sub-indices: B, BB. All entities are domiciled in North America. Markit CDX indices roll every 6 months in March & September. • The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. Intercontinental Exchange (ICE) US computes this by using the rates supplied by some 500 banks.
Investing involves certain risks, including possible loss of principal. You should understand and carefully consider a strategy’s objectives, risks, fees, expenses, and other information before investing. The views expressed in this commentary are subject to change and are not intended to be a recommendation or investment advice. Such views do not take into account the individual financial circumstances or objectives of any investor that receives them. All indices are unmanaged and are not available for direct investment. Indices do not incur costs including the payment of transaction costs, fees, and other expenses. This information should not be considered a solicitation or an offer to provide any service in any jurisdiction where it would be unlawful to do so under the laws of that jurisdiction. Past performance is no guarantee of future results.
© 2025 SWBC. All rights reserved. Securities offered through SWBC Investment Services, LLC, a registered broker/dealer. Member FINRA & SIPC. Advisory services offered through SWBC Investment Company, a Registered Investment Advisor, registered as such with the US Securities & Exchange Commission. SWBC Investment Services, LLC is under separate ownership from any other named entity. SWBC Investment Services, LLC a division of SWBC, is a nationwide partnership of advisor.