The content on this website is intended for investment professionals and institutional asset owners. Individual retail investors should consult with their financial advisers before using any of the content contained on this website. Breckinridge uses cookies to improve user experience. By using our website, you consent to our cookies in accordance with our cookie policy. By clicking “I Agree” and accessing this website, you represent and warrant that you are agreeing to the above statements. In addition, you have read, understood and agree to the terms and conditions of this website. The content on this website is not intended for use or distribution outside of the U.S., unless permitted by applicable law.


Commentary published on November 8, 2023

October 2023 Market Commentary


  • U.S. Treasury Curve: Treasury yields remained at 15-year highs and the curve steepened, as investors processed sometimes conflicting signals from economic data and market conditions and sentiment (See Figure 1).
  • Municipal Market Rates and Technicals: Municipal bond yields continued to increase across the curve. New issuance exceeded $37 billion, about 29 percent higher than October a year ago. Municipal bond mutual fund outflows were more than $3 billion.
  • Corporate Market Technicals: Investment grade (IG) fixed-rate corporate bond issuance was $79 billion. IG bond fund outflows were about $10 billion.
  • Securitized Trends: Mortgage-Backed Securities underperformed again while CMBS and ABS also generated negative excess returns.

(The following commentary is a summary of discussions among members of the Breckinridge Capital Advisors Investment Committee as they reviewed monthly activity in the markets and investment returns. The members of the Investment Committee under the leadership of Chief Investment Officer Ognjen Sosa, CAIA, FRM, are Co-Head of Portfolio Management, Matthew Buscone; Head of Municipal Trading, Sara Chanda; Co-Head of Research, Nicholas Elfner; Co-Head of Portfolio Management, Jeffrey Glenn, CFA; and Co-Head of Research, Adam Stern, JD.)

Market Review

As another volatile month in the bond markets wrapped up, the Federal Reserve (Fed) and Treasury Department prepared announcements that investors were anxiously anticipating: the Fed’s decision on interest rates and Treasury’s borrowing plan for the months ahead.

The Fed chose to hold interest rates steady for now. Inflation and hiring data showed some signs of moderating, while consumer confidence readings were lower.1 Taken together, the data relieved some pressure on the central bank to increase the fed funds rate, with its next meeting planned for December 12 and 13. In addition, a persistent rise in long-term Treasury rates during October had the effect of tightening financial conditions.

The heightened level of Treasury debt auctions caused many analysts to suggest increases in government bond issuance contributed to October’s surge in longer-term U.S. Treasury yields as well as negative equity returns. While Treasury’s plans announced on November 1 were somewhat lower than anticipated, the deficit and borrowings to fund it remained elevated.2

The Bureau of Economic Analysis estimated the third quarter gross domestic product (GDP) was 4.9 percent, which is more than two times the second quarter rate of economic growth and reflects the fastest pace of growth in two years. The report confirmed a relatively high pace of economic growth despite the Fed’s 19-month rate hiking campaign. Volatility in the bond market was elevated compared with the prior month (See Figure 2).

Based on Bloomberg (BBG) data, yields for Treasury bonds increased across the curve. Treasury yields at 2-, 5-, 10-, and 30-year maturities were higher by 4, 24, 36, and 39 basis points (bps), respectively. For the second consecutive month, increases in intermediate- and long-maturity-yields steepened the curve overall and reduced the inversion of short-maturity yields relative to longer maturities.

The BBG U.S. Treasury Bond Index3 fell 1.21 percent. The BBG U.S. Aggregate Bond Index4 lost 1.58 percent.

Municipal Market Review

While municipal bond yields increased, they outperformed Treasuries. Also, similar to Treasuries, the municipal bond yield curve steepened overall and the front-end inversion of shorter- and longer-maturities declined.

The BBG Managed Money Short/Intermediate (1-10) Index5 fell 0.24 percent and the BBG 1-10 Year Municipal Bond Blended Index6 was 0.23 percent lower. Longer duration bonds lagged the most; 10-year and 15-year bonds fell 0.55 percent and 0.89 percent, respectively. While higher quality (bonds rated AA and AAA) outpaced lower quality (bonds rated BBB) by 80bps in October, BBBs have held in the better year-to-date, down 1.6 percent, besting AAAs by 130bps. Municipal/Treasury (M/T) ratios were steady (See Figure 4).

The Bond Buyer reported that total issuance for October was more than $37.1 billion, a 29 percent increase over the same period one year ago. 

Issuance for the month was lower than the 10-year average of more than $43 billion. At almost $316 billion on a year-to-date (YTD) basis, 2023 municipal bond issuance was more than 8 percent lower than 2022, as of October 31.

For the month, tax-exempt issuance rose nearly 19 percent to $29.832 billion compared with the same period in 2022. Taxable issuance totaled $3.8 billion, up 28 percent from $3 billion a year ago, and five times the level issued in September 2023.

Monthly outflows from municipal bond funds continued, totaling about $3.3 billion, Lipper reported.

Corporate Market Review

Investment grade (IG) corporate bond spreads widened by 9bps, per BBG data, to close October at an option-adjusted spread of 130bps. 

While lower-quality bonds outperformed higher-quality corporates on a total return basis, higher rated bonds outperformed lower rated bonds on an excess return basis. Shorter-maturity bonds outperformed longer maturities on the basis of total and excess returns.

For the period ended October 31, the BBG U.S. Corporate IG Index7 monthly total return was negative 1.87 percent and a negative excess return compared with duration-matched Treasuries of 0.34 percent. Per BBG, the best-performing sectors and subsectors were Exploration and Production, Oil Field Services, Wirelines, and Automotive. Among the worst-performing sectors and subsectors were Gaming, Airlines, Life Insurance, Transportation Services, and Railroads.

FactSet reported on October 27 that at the mid-point of the third quarter earnings season for the S&P 500, both the number of positive earnings surprises and the magnitude of these earnings surprises are above 10-year averages. FactSet noted in its report that the S&P 500 reported year-over-year growth in earnings for the first time since Q3 2022 to the mid-point in the third quarter 2023 earnings season.

Investment grade, fixed-rate corporate bond supply for October was $79 billion, BBG reported, with net issuance of $45 billion after $34 billion in redemptions. About $10 billion in assets flowed out of IG bond mutual funds in September, per Lipper.

Securitized Market Review

ABS, both Auto Loan and Credit Card, were the best-performing sectors in the securitized markets for the month of October on a total and excess return basis. Commercial mortgage-backed securities (CMBS), including Agency and Non-Agency CMBS, lagged Treasuries but outperformed mortgage-backed securities (MBS). Higher coupon MBS—pools with 6 and 6.5 percent coupons—were the best performers among conventional11 and GNMA12 MBS. 

Equity Market Review 

The Chicago Board Options Exchange (BoE) Volatility Index13 (VIX) remained at elevated levels, exceeding the average levels of the third quarter average, though began to decline as month-end approached (See Figure 5).

The S&P 500 Index declined 2.1 percent on the month, the Russell 1000 Value Index14 dropped 3.5 percent, and the Russell 1000 Growth Index15 fell 1.4 percent. Despite relatively favorable earnings performances among many of the sectors in the S&P 500 and solid GDP data, investors continued to behave in ways that suggested uncertainty driven by the continuing interest rate increases and some inconsistency in data across key economic measures.

Most sectors were weaker. Utilities (+1.23 percent), Technology (-0.07 percent), Consumer Staples (-1.37 percent), Communication Services (-2.00 percent) beat the average return for the S&P 500 Index. Sectors that trailed the average S&P return included Energy (-6.08 percent), Consumer Discretionary (-4.51 percent), Healthcare (-3.33 percent), Materials (-3.22 percent), Industrials (-2.97 percent), Real Estate (-2.93 percent), Financials (-2.62 percent).


[1] The Bureau of Labor Statistics (BLS) reported that Core Personal Consumption Expenditures (PCE) Price Index (ex-food/energy) dropped to 2.4 percent over the third quarter, down from 3.7 percent in second quarter and 5 percent in the first quarter. The BLS reported that companies added 150,000 workers in October, lower than September’s 279,00 gain, which was revised lower, and the smallest increase since June. The unemployment rate rose to 3.9 percent from 3.8 percent in the prior month. The Conference Board's index of consumer confidence decreased in October, due to increased pessimism about the present situation and future expectations. Confidence has now fallen in the past three months, highlighted by declines across categories in October.

[2] On November 1, the U.S. Treasury Department announced it will increase the auction sizes of longer-term notes and bonds, ranging from the 10-year note to the 30-year bond, by slightly less than what some analysts expected. Auctions of 10-year notes will increase by $2 billion after being bumped up by $3 billion in the last adjustment in August. Thirty-year bond auctions will increase by $1 billion, down from a $2 billion increase in August. Auctions of 20-year bonds will remain at August levels, according to the announcement.

[3] The Bloomberg U.S. Treasury Bond Index is an unmanaged index of prices of U.S. Treasury bonds with maturities of 1 to 30 years. You cannot invest directly in an index.

[4] The Bloomberg U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment-grade, U.S.-dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities. You cannot invest directly in an index.

[5] The Bloomberg Municipal Managed Money Short/Intermediate Index 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.

[6] The Bloomberg Municipal 1-10 Year Blend 1-12 Year Index measures the performance of short and intermediate components of the Municipal Bond Index — an unmanaged, market value-weighted index which covers the U.S. investment grade, tax-exempt bond market. You cannot invest directly in an index.

[7] The Bloomberg U.S. Corporate Bond Index is 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.

[8] 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.

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

[10] 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.

[11] Conventional MBS are issued by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC).

[12] Ginnie Mae MBS are issued by the Government National Mortgage Association (GNMA).

[13] 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.

[14] 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.

[15] 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-11032023-slt3eh7b (11/7/2023)



This material provides general and/or educational information and should not be construed as a solicitation or offer of Breckinridge services or products or as legal, tax or investment advice. The content is current as of the time of writing or as designated within the material. All information, including the opinions and views of Breckinridge, is subject to change without notice.

Not all securities or issuers mentioned represent holdings in client portfolios. Some securities have been provided for illustrative purposes only and should not be construed as investment recommendations.

Past performance is not a guarantee of future results. Any index results shown are for illustrative purposes and do not represent the performance of any specific investment. Indices are unmanaged and investors cannot directly invest in them. They do not reflect any management, custody, transaction, or other expenses, and generally assume reinvestment of dividends, income, and capital gains. Performance of indices may be more or less volatile than any investment strategy.

All investments involve risk, including loss of principal. Diversification cannot assure a profit or protect against loss. No investment or risk management strategy can guarantee positive results or risk elimination in any market. Fixed income investments have varying degrees of credit risk, interest rate risk, default risk, and prepayment and extension risk. In general, bond prices rise when interest rates fall and vice versa. This effect is usually more pronounced for longer-term securities. Income from municipal bonds can be declared taxable because of unfavorable changes in tax laws, adverse interpretations by the IRS or state tax authorities, or noncompliant conduct of a bond issuer.

Equity investments are volatile and can decline significantly in response to investor reception of the issuer, market, economic, industry, political, regulatory, or other conditions.

Separate accounts may not be suitable for all investors.

Breckinridge believes the data provided by unaffiliated third parties to be reliable, but investors should conduct their own independent verification prior to use. Some economic and market conditions contained herein have been obtained from published sources and/or prepared by third parties, and in certain cases have not been updated through the date hereof. All information contained herein is subject to revision.

Certain third parties require us to include the following language when using their information:

BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg does not approve or endorse this material or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

The S&P500 Index (“Index”) and associated data is a product of S&P Dow Jones Indices LLC, its affiliates and/or their licensors and has been licensed for use by Breckinridge. © 2023 S&P Dow Jones Indices LLC, its affiliates and/or their licensors. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). Neither S&P Dow Jones Indices LLC, SPFS, Dow Jones, their affiliates nor their licensors (“S&P DJI”) make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and S&P DJI shall have no liability for any errors, omissions, or interruptions of any index or the data included therein.