The following commentary summarizes discussions among members of the Breckinridge Capital Advisors Investment Committee as they reviewed monthly market activity and investment returns. The Investment Committee, led by Co-Chief Investment Officers Matthew Buscone and Jeffrey Glenn, CFA, includes Co-Heads of Research, Nicholas Elfner and Adam Stern, J.D., M.P.A.; and Portfolio Manager and Director, Corporate Research, Josh Perez, CFA.

MARKET REVIEW

Market volatility persisted through November, fueled by concerns over a potential artificial intelligence (AI) investment bubble and the risk of private credit defaults. The federal government reopened mid-month following its longest shutdown in history, which allowed for the release of previously delayed economic data. Notably, September’s nonfarm payrolls increased by 119,000, and U.S. real gross domestic product (GDP) expanded at a 3.8 percent pace in the second quarter. Third- and fourth-quarter estimates project growth at 2.9 percent and 1.0 percent, respectively. Inflation remained elevated, with the core Consumer Price Index (CPI) up 3.0 percent year-over-year in September, driven by persistent services price pressures despite continued moderation in shelter costs.

Treasury yields declined across most of the curve, reflecting shifting market expectations. The 2-year yield dropped by 8bps, the 5-year by 9bps, and the 10-year by 6bps, while the 30-year yield edged up 1bp (See Figure 1). This movement contributed to a 0.62 percent total return for the BBG U.S. Treasury Index for the month.

Bond market volatility, as measured by the ICE Bank of America/Merrill Lynch Option Volatility Estimate (MOVE) Index,³ indicated heightened uncertainty (See Figure 2). Futures markets are now fully pricing in a 25bps fed funds rate cut at the December Federal Reserve meeting, alongside a steepening in the 2s/10s yield curve, suggesting a market belief in future monetary easing. 

The Breckinridge Investment Committee (IC) anticipates two additional rate cuts by mid-2026, with the 10-year Treasury yield expected to trade between 4.0 percent and 4.5 percent in the near term. Given an outlook for moderate real growth and tight valuations in spread sectors, portfolio positioning remains defensive, though elevated yields continue to attract investor interest. The IC notes that if October’s payroll data reveals further labor market weakness, it would strengthen the case for a December rate reduction.

MUNICIPAL MARKET REVIEW

Municipal bond issuance totaled $44.6 billion in November, a decrease from the prior month’s $58.3 billion but consistent with seasonal trends. New supply remained elevated compared to recent years, contributing to increased dealer inventories, with at least two additional heavy issuance weeks anticipated in early December. Municipal fund flows recorded $854 million in inflows for the month, according to LSEG data, bringing the YTD total inflows to $44 billion into ETFs and open-end mutual funds.

The Bloomberg Short/Intermediate Municipal Bond Index⁴ posted a modest total return of 0.23 percent in November, reflecting slight price appreciation despite limited movement in yields. Municipal yields were largely unchanged across the curve, falling by 1bp at the 2-year and 30-year tenors, rising by 1bp at the 5-year, and remaining flat at the 10-year (See Figure 3). Muni yield stability contrasted with broader Treasury yield declines across most maturities.

M/T ratios ended the month at 71 percent for 2-year, 67 percent for 5-year, 68 percent for 10-year, and 88 percent for 30-year maturities (See Figure 4). Ratios at the intermediate part of the curve remained below historical averages, while the 30-year ratio held at a relative premium. The market appeared range-bound, with valuations reading as somewhat rich despite the heavy year-to-date supply.

Despite the richer valuations and tighter spreads, municipal bonds may be supported by strong reinvestment demand expected to accelerate at the start of the new year. The IC observed that while ratios and spreads appear elevated, seasonally lighter supply in mid-December and robust demand dynamics could provide support.

CORPORATE MARKET REVIEW

The IG Corporate Bond Index OAS widened by 2bps in November, indicating a slight increase in perceived credit risk. The corporate bond index posted a total return of 0.65 percent, with an excess return of negative 0.02 percent.

The best-performing corporate sectors were Tobacco, Pharmaceuticals, and Wirelines, demonstrating resilience in a widening spread environment. Conversely, Sovereigns, Chemicals, and Metals and Mining were the worst-performing sectors, reflecting industry-specific headwinds or greater sensitivity to market sentiment.

Corporate bond gross issuance totaled $129 billion in November, with redemptions at $66 billion, resulting in net supply of $63 billion. Year-over-year, gross monthly issuance in November was up 51 percent, driven in part by elevated borrowing from the Technology sector to fund data center capital expenditures. This surge in issuance suggests a strong demand for debt capital, particularly from growth-oriented sectors.

Mutual fund and ETF flows into taxable bond funds totaled $47.1 billion for the month, per the Investment Company Institute.

SECURITIZED MARKET REVIEW

MBS generated a total return of 0.62 percent in November, though excess returns declined by 0.05 percent. Commercial MBS (CMBS) returned 0.75 percent, while Agency CMBS (ACMBS) returned 0.71 percent.

ABS posted a total return of 0.56 percent and excess returns of 0.05 percent. Auto loan ABS returned 0.57 percent, outperforming credit card ABS, which returned 0.55 percent. ABS spreads remained unchanged on the month, despite healthy issuance of $40 billion.

EQUITY MARKET REVIEW

The S&P 500 Index recorded a modest total return of 0.25 percent for November. The Chicago Board Options Exchange (CBOE) Volatility Index⁸ (VIX), a measure of equity market volatility, reached an intramonth high not seen since April’s drawdown, temporarily exceeding the 200-day moving average of 19.75 at month-end (See Figure 5) before moderating to below that level by the end of the month.

Health Care (9.3 percent), Communication Services (6.4 percent) and Materials (4.2 percent) were the best-performing sectors. Late-month strength in growth-oriented sectors was a key driver of the overall index performance. Underperforming sectors for the month included Information Technology (4.3 percent), [KW1] Consumer Discretionary (-2.4 percent) and Industrials (-0.85 percent). The Russell 1000 Value Index⁹ returned 2.7 percent, while the Russell 1000 Growth Index¹⁰ declined 1.8 percent, highlighting the rotation away from growth and into defensive and value-oriented equities.

Per BBG data, Low Volatility, Value and Dividend Factors outperformed during the month, while Beta, Growth, and High Market Capitalization factors underperformed. S&P 500 returns were supported by a late-month rally, with the index gaining 3.74 percent in the final week.

[1] The Municipal/Treasury (M/T) ratio compares yields of municipals bonds with those of U.S. Treasury bonds of the same maturity. M/T ratios can show the relative value of municipal bonds compared with taxable bonds, by indicating when yields for municipal bonds exceed the after-tax yields on taxable bonds.

[2] As of November 30, 2025, as measured by the BBG U.S. Corporate Investment Grade Bond Index, an unmanaged market-value-weighted index of investment grade corporate fixed-rate debt issues with maturities of one year or more. You cannot invest directly in an index.

[3] As of November 30, 2025, based on the Intercontinental (ICE) Bank of America/Merrill Lynch Option Volatility Estimate (MOVE) Index, which tracks the movement in U.S. Treasury yield volatility implied by current prices of one-month over-the-counter options on 2-year, 5-year, 10-year and 30-year Treasuries. Historically, the index rises as concerns grow that interest rates may be higher. You cannot invest directly in an index.

[4] Municipal bond performance is as measured by the BBG Managed Money Short/Intermediate (1-10) Index, which measures the performance of the publicly traded municipal bonds that cover the USD-denominated short/intermediate term tax-exempt bond market, including state and local general obligation bonds, revenue bonds, insured bonds, and pre-refunded bonds. It is rules-based, and market-value weighted. You cannot invest directly in an index.

[5] The Bloomberg MBS Index tracks agency mortgage-backed pass-through securities (both fixed-rate and hybrid ARM) guaranteed by government-sponsored enterprises (GSEs) Government National Mortgage Association (Ginnie Mae) (GNMA), Federal National Mortgage Association (Fannie Mae) (FNMA), and Federal Home Loan Mortgage Corporation (Freddie Mac) (FHLMC). The index is constructed by grouping individual pools into aggregates or generics based on program, coupon, and vintage. You cannot invest directly in an index.

[6] The Bloomberg U.S. CMBS Investment Grade Index measures the market of U.S. Agency (GNMA, FNMA, and (FHLMC) and U.S. Non-Agency conduit and fusion CMBS deals with a minimum current deal size of $300mn. You cannot invest directly in an index.

[7] Bloomberg U.S. Asset-Backed Securities (ABS) Index is the ABS component of the Bloomberg U.S. Aggregate Bond Index, a flagship measure of the U.S. investment grade, fixed-rate bond market. The ABS index has three subsectors: credit and credit cards, autos, and utility. You cannot invest directly in an index.

[8] The Chicago Board Options Exchange (OEX) Volatility (VIX) Index is the ticker symbol and name for the Chicago Board Options Exchange's (CBOE) Volatility Index, a measure of the stock market's expectation of volatility based on S&P 500 index options. You cannot invest directly in an index.

[9] The Russell 1000® Value Index is an unmanaged market capitalization-weighted index of value-oriented stocks of U.S. domiciled companies that are included in the Russell 1000 Index. Value-oriented stocks tend to have lower price-to-book ratios and lower forecasted growth values. You cannot invest directly in an index.

[10] The Russell 1000® Growth Index is an unmanaged market capitalization-weighted index of growth-oriented stocks of U.S. domiciled companies that are included in the Russell 1000 Index. Growth-oriented stocks tend to have higher price-to-book ratios and higher forecasted growth values. You cannot invest directly in an index.

BCAI-12042025-ji5imd9m (12/8/2025)

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