Trends in the Credit Markets

LIZ ANN SONDERS: I'm Liz Ann Sonders.

KATHY JONES: And I'm Kathy Jones.

LIZ ANN: And this is On Investing, an original podcast from Charles Schwab. Every week, we analyze what's happening in the markets and discuss how it might affect your investments.

Well, hi, Kathy. Happy mid-summer. As always, a lot going on in the markets for us to unpack.

We are in the midst of earnings season, and so far, sort of so good in the sense that metrics that are often widely watched like the beat rate, the percent by which companies beat, are about tracking with the past four quarter averages. So somewhere around 77, 78% beat rate, and the percent by which companies are beating is running at about 6%. Now those are moving targets. Even at the point that this pod episode gets posted those numbers will be updated. But so far, earnings are tracking about in line with what the consensus was heading into earnings season, which is actually only about 6% growth. And if the consensus is accurate, which it probably isn't, that would be about a 50% haircut relative to the growth rate when all was said and done for the first quarter.

But I continue to think that the focus will be, and has been so far, on the outlooks more so than the reports for the second quarter, whether we're still in this kind of murky environment for corporate guidance and what they're saying—certainly those that are impacted by tariffs—what they're saying about pricing power and margin pressure. So that's what I'm going to be keeping my eyes on.

Also interesting is we're at about a three-year, I guess you would call it, low in terms of the stocks of companies missing estimates, the hit that is accruing to those stocks for the first trading day after reports—and that's the worst it's been in three years. And in turn, the beats are not really getting rewarded all that much. So even though one could argue in terms of the consensus of percentage change in earnings that the bar has been set fairly low, I think the sentiment bar is a bit higher, and that's resulted in the misses getting punished more than beats are rewarded. And it wouldn't surprise me to see that persist throughout the course of reporting season.

We have a lot of really popular, some of the biggest names, gearing up to report over the next few weeks, especially in the tech area. So we'll be keeping an eye on that.

And as usual, we've got uncertainty and instability with regarding tariffs, and that that continues to loom over everything. We've got the most recent latest "deadline"—nobody can see the air quotes that we're doing here—of August 1st, with the focus in particular on Japan and the European Union. And that policy uncertainty probably has the Fed in "wait and see" mode for the foreseeable future. 

So I'll toss it back to you maybe on that note. Obviously, the Fed and Powell and "Will he stay or will he go?" is big in the news again this week. So what are your latest thoughts, Kathy?

KATHY: Yeah, as we've discussed offline, knives are out for this guy.

LIZ ANN: Haha.

KATHY: I mean, he's getting pummeled from a lot of different sides right now. You know, "Et tu, Brute?" I mean, there's quite a few folks who probably are vying for the position themselves and trying to …

LIZ ANN: Maybe more than the list that has been bandied about.

KATHY: Right, yeah. I think there's a lot of people who are trying to put their hands up without putting their hands up for the job.

LIZ ANN: Exactly.

KATHY: And you know, I think the most confusing for me is people who make the case that, "Well, if he can't maintain the confidence of the market, he should step aside." Well, first of all, you're making the assumption that he doesn't, and the market seems to be chugging along OK. But the second thing is that what's created this question of confidence is the attacks on the interest rate policy. I mean, when all is said and done, this is about interest rate policy and the administration wanting to make the case for the Fed to lower rates.

And so if he does leave of his own volition—I think it would have to be his own volition—it would look as if he was pushed out. And if you push out the head of the central bank, you create a loss of confidence. So this can be kind of a circular, self-fulfilling thing if it keeps up. So keeping an eye on it. Right now the markets seem undisturbed, but I do think that if something like that were to come to pass, if he did get pushed out, I do think it would be very negative for the dollar and would push long-term rates up because the assumption would be that, yeah, you put somebody in who's just going to do the bidding of the administration, which is always to lower interest rates.

So very confusing to me that it's gotten to this point with really the economy kind of chugging along. Inflation is improving. It's not there yet, but it's improving. And market's doing just fine with where interest rates are right now.

LIZ ANN: Yeah, can I ask you a question on that front? I have had this sort of, I guess, contrarian view that part of the reason why the equity market has been doing well is not in anticipation of imminent cuts by the Fed, but maybe because the Fed isn't cutting, it doesn't have the ammunition to cut. Would you say the same thing applies to what has been just kind of a range-bound, you know, 10-year yield kind of backdrop because the Fed is not poised to imminently cut?

KATHY: Yeah, I mean, there's … you know, as you know, there's a lot of concerns about fiscal policy and how that will drive up the amount of supply of Treasuries that's going to come to the market, and that the only way to sort of offset that is to have a somewhat higher interest rate environment than you might otherwise had. If we had a balanced budget or a low budget deficit or declining budget deficit, then rates would be coming down, in my opinion, because the expectation would be, "Well, less supply on the horizon, that implies that the conditions are pretty benign and not too much to worry about." We have kind of the opposite environment. So if the Federal Reserve or the central bank doesn't stand in the way of basically monetizing the debt, then the market's going to sense that and not like it.

So I would agree with you. We've created an environment where financial conditions for companies are really good, access to credit's really good, consumers are feeling the pinch of some of the higher interest rates, but some of that is by design to prevent demand from overheating. So yeah, I would agree with you. I think the easy conditions are largely, or to some extent, the result of the Fed holding the line and communicating, "Yeah, we're not going to let inflation really just take off." But, you know, that doesn't necessarily satisfy folks that are looking for lower interest rates, lower financing costs for a variety of reasons, particularly housing.

So it's an interesting time. I don't recall in my experience having it be quite so open and aggressive. I know there was a kind of an internal revolt when Paul Volcker was at the end of his term, and he did step down because the rest of the board didn't agree with him. But it was not this external kind of thing going on. So interesting times, and you know, we're going to be getting some more data coming up. We'll be getting the employment data, and that's going to be something I think the Fed keeps an eye on. But right now, you're right, bond market's just kind of hanging in there, going sideways, waiting to see what happens.

LIZ ANN: So Kathy, speaking of the Fed and the bond market, this week we have our colleague Collin Martin returning to the show. I'm sure you're excited about that.

KATHY: I am. Collin is a frequent guest here on the podcast. He specializes in taxable credit markets, but really just a wealth of insight on fixed income and monetary policy. And he's my colleague in arms on the fixed income side.

He's a director and fixed income strategist on my team here at the Schwab Center for Financial Research. He also holds a Chartered Financial Analyst designation, and he's a frequent guest on Bloomberg TV.

He's also widely quoted in the usual financial publications you would expect, including The Wall Street Journal, MarketWatch, Barron's, and Reuters.

So Collin, welcome to the show.

COLLIN MARTIN: Hi, Kathy, thank you for having me back.

KATHY: So there's not as much going on in the Treasury market these days as you might think, given all the news, but we've seen yields kind of trend sideways for a month or so, I guess, kind of waiting to see how these various factors work out. 

But there have been some interesting stuff going on in the fixed income markets besides the Treasury market, which we talk about a lot. And since you focus a lot on corporate credit, I thought maybe we could talk a little bit about some of the stuff going on there, some of the trends that have taken place. And one thing that I have noticed is issuance of corporate bonds is up this year—and not just in U.S. dollars, but in euros as well. So talk a little bit about what you're seeing on the issuance side.

COLLIN: Corporate issuance has been relatively strong this year. It ebbs and flows, of course, but through mid-July, it was up a little bit on a year-over-year basis.

If we just look at just right now, kind of the past few weeks, Kathy, it's been a pretty good time for a corporate bond issuer because there's really two things that a corporation is going to look at, but it's more about what their borrowing costs are. And a corporate issuer's borrowing cost is made up of the level of Treasury yields plus a spread, or risk compensation, for investors or for lenders to lend to that corporation. And if we look at kind of the all-in borrowing costs for these businesses, they're relatively low.

On average, corporate bond yields are close to 5% right now. And there's a few lenses that we can look at that through, us as investors, but as corporations, the borrowers. And that's kind of on the low end of their three-year range, and the relative yield, that spread that corporations have to pay above Treasuries, is very low, very slim. And that's kind of a sign of confidence for corporations that investors and lenders are willing to lend at those low spreads. 

There's been an interesting trend throughout the course of the year. We saw a lot of it in April and May specifically through kind of non-U.S. dollar issuance from U.S.-based or U.S.-incorporated corporations, specifically with the euro. And there's a term for this. They're called "reverse Yankee issuance" or issues. And there's a lot of data out there. What I have most recently is just through the end of May, and through May—so through the first five months of the year—the reverse Yankee issuance set a new record through those first five months of the year.

KATHY: Yeah, I thought that was … that caught my eye a little while ago. And as you know, we've been kind of tracking this. And it appears to me that it's opportunistic. Is that your take on it, that they're looking at yields, they're looking at the dollar, and they're saying, "Good time to issue in euros," or is there that much business now being done in euros that it makes sense to issue in euros? So what's the backstory here?

COLLIN: It's probably all of the above. I think it's really two things.

One, slightly opportunistic, but also the idea of all the trade certainty as a result of the tariffs and what that means for the direction of the dollar. In terms of opportunistic, yes, I think businesses are always looking to kind of optimize their borrowing to see what's going to be "cheapest for me." And if we look at the yields offered, or the borrowing costs for a business if they do offer a new bond in Europe, for example, it is lower on just a yield or coupon basis than what they can issue here in the U.S. That's kind of been the case for a while, though. That fluctuates, but U.S. yields, whether it's at the Treasury standpoint or for corporations, they tend to be higher than the yields offered in Europe. But I think that businesses are looking at it from that lens. And if they can issue at, say, two percentage points lower, which is around the range that we're talking about, I think that makes a lot of sense.

But also, I think all the uncertainty around the dollar and trade policy and just the volatility we've seen in the U.S. markets, I think it's their way of sort of diversifying their borrowing base. And they're probably seeing a little bit more stability there than what they're seeing here in the U.S. So we might continue to see it as the year progresses, but I think it's both opportunistic and in addition to kind of just spreading out more potential borrowers out there.

KATHY: Yeah, I think that's an interesting take too, because you used to hear companies say, "Well, they didn't really take advantage of lower rates elsewhere because they weren't sure that the appetite was there for issuance in the corporate market, or it wasn't as broad and deep as in the U.S." And it sounds like maybe that's evolving. Maybe with the dollar dropping and everything that's going on, that's evolving, and there's a better appetite for U.S. corporations to issue in other currencies.

COLLIN: Yes, I totally agree. There's probably a limit, some sort of limit. I don't know what that is, but you mentioned size. And yes, the U.S. corporate market is way bigger than what we see overseas, specifically in Europe. So if all corporations, or a huge number of corporations said, "Hey, I want to issue over there because I think those yields look attractive, or I can hedge my currency costs and lock in a lower rate," then if we start to see this large increase in supply, then you might start to see yields rise to absorb that supply. So I think we'll probably see a steady increase, but I don't think we'll see this huge shift overseas just based on the size differences.

KATHY: Yeah, that's interesting.

Another part of the market where we've seen issuance pop up, you mentioned to me recently, was the leveraged loan market. That's a little surprising too, given what we're expecting in terms of interest rates. So tell me about that.

COLLIN: This is sort of niche, Kathy, but leveraged loans, it's a type of high-yield investing. A leveraged loan is like a high-yield bond. They're slightly different in that they don't trade as frequently. They're less liquid.

What's important to understand with leveraged loans is that they are generally issued by sub-investment grade issuers. So from a credit quality standpoint, it's similar to high-yield bonds, sub-investment grade ratings, which is generally BB or below by both Moody's and Standard & Poor's.

And another caveat with leveraged loans is that their coupon rates tend to be floating, where the coupon rate is usually based off of something called the Secured Overnight Financing Rate, or SOFR, and then a spread. And I mentioned spreads before, and for leveraged loans, spreads can vary depending on the issuer, but we're probably looking at spreads close to 3% or so on average.

And as you mentioned, we've seen a lot of issuance lately. Specifically just to talk about actual data: On Monday, July 21st, it was the second most daily issuance on record. There was $61 billion in issuance, 33 total loans were issued, but there's a few things that we can explore as we kind of go under the hood there.

Of those 33 issues, all but six of them were repricings or refinancings. And that's a key caveat with leveraged loans. When they're issued, they have terms, just like a traditional high-yield corporate bond might. But usually the issuer can basically call it in or retire it or refinance it whenever it wants. So if conditions improve, if issuing conditions improve and the company can lower its interest cost, they'll probably renegotiate and lower its interest cost accordingly. So I think we saw a lot of that, which I guess isn't too surprising. If we look at kind of the investing landscape, not just with bonds, but with stocks, we're seeing the stock market continue to rise—the S&P 500® at or near all-time highs. We're seeing that with corporate bonds where investors are willing to take more risks, and that means that issuers, even if they're risky, they're going to take advantage of that. And if lenders are willing to accept a lower spread or less risk premium, again, we'll see corporations and businesses take advantage of that.

Now, another caveat—you reference this—is what the potential direction of interest rates could mean for leveraged loans, because they do have those floating coupon rates. So they're highly related, highly correlated to the fed funds rate. So not only were these issuers likely to renegotiate into tighter spreads, if the Federal Reserve ends up cutting rates over the next few months and quarters, that means their interest expense can continue to decline. So that's good for them, not so great for investors. And that's a key kind of characteristic to be aware of if you're considering leveraged loans. It's one that they're very risky, of course, but two, the income that we as investors earn would likely fall as the Fed cuts rates.

KATHY: Yeah, and that's why I've been a little surprised when you pointed out that the issuance was so high. That means there's demand. But our investors maybe aren't seeing short-term rates going down as much as other folks are. Or are they just looking at the current yield and say, "Oh, that that looks great to me. I'll take that and, you know, live to fight another day or find another investment down the road"? But generally, my recollection is that demand goes up as interest rates are going up for floating-rate paper, not the other way around. So I guess all this tells us there's a lot of demand for corporate issuance right now.

COLLIN: Yeah, there is. Aside from … if we look just over the past few months, we can look at flows in and out of ETFs. And kind of in aggregate at a high-level view, we saw some outflows for corporate funds, specifically high-yield bond funds in April. That's since reversed. Just like, again, the stock market has increased, investors in the bond market are willing to take risks. Even though you and I are a little bit more concerned about the economic outlook and even the outlook for corporate fundamentals, but that hasn't really stopped investors from lending at relatively low spreads.

KATHY: Yeah, that's been a little bit of a curiosity as well because we have been focused on what might slow the economy, or the things that are slowing the economy. But I think that we can say that the … well, you tell me, the best of the corporate fundamental improvement is probably behind us for this cycle. The future doesn't look as good as the past. It may not look terrible, but it doesn't look as good as the past. But would you say that's fair characterization?

COLLIN: Absolutely, I think it's very fair. So a way I would phrase it is we're probably past peak credit quality for U.S. corporations. Not that we're expecting it to plunge anytime soon, but we had all these tailwinds from easy monetary policy coming out of the pandemic and a lot of fiscal stimulus, pent-up demand for consumers to spend. That peak is probably behind us, and I'm a little bit more concerned that we will see corporate fundamentals weaken a little bit from here. And I think that's a bit contrarian. It's not something we hear about too much. And it's probably a little bit surprising knowing that the stock market continues to rise. I don't want to keep harping on that, but I think it's good to kind of put those together to show that maybe we're seeing some divergence here.

When I look at the health of the corporate bond market, I'm not really just looking at the S&P 500 because that's a narrow look at 500 companies. And the corporate bond market, with investment grade and high-yield ratings and loans, it's a larger swath of issuers. And when I look at corporate profit data, which I get from the Bureau of Economic Analysis, there's a big lag there. But when we got the data for the first quarter, we saw a quarterly decline, which isn't the end of the world. You know, corporate profits, they generally rise, but we can see ups and downs. But on a percentage basis, it was the largest quarterly drop since the fourth quarter of 2020. So that's a bit concerning.

But it's very different from what you see and hear when you're looking at the stock market. So I looked up, just to kind of compare these two, I went to FactSet to see what was S&P 500 earnings growth in the first quarter. And it was very much positive. So you kind of contrast those two at a big-picture level, you see a difference there.

It's not just profits that make us a bit worried, but balance sheets, or kind of the ratio of a business's assets to its liabilities. And we saw that decline in the first quarter also. We get that data from the Federal Reserve. They release it on a lag also. It comes out quarterly. But that wasn't very positive. And then we started to see the rating agencies kind of take note of that. Obviously, they know what's going on. They're not waiting for the BEA or the Fed to release their data. But in the second quarter, we saw specifically with high-yield corporations, the ratio of downgrades to upgrades—so negative-rating actions to positive-rating actions—at its highest level, meaning more negative actions, since late 2023. So we're worried that corporate fundamentals are weakening, and just to kind of tie it all together, in an environment where investors aren't being compensated too well for risks.

So not that we're expecting corporations to kind of fall off a cliff and see their profits fall sharply, but if we see corporate profit growth slow or balance sheets weakening, we prefer to see slightly higher risk premiums or spreads to invest and lend to those companies.

KATHY: Yeah, I feel like we've been saying that for some time and, you know, it's always a good reminder. But the market, as we know, can continue to chug along blissfully ignoring the fundamentals for a long time until they finally come into focus.

So OK, I'm an investor. You know, what do I do with this? The spreads are low. The yields are not bad. Yields are pretty attractive, but the spreads are low, and fundamentals may be deteriorating a little bit going forward. And the Fed is biased towards cutting, but we don't know when or how soon or how much. So if you're an investor, what kind of perspective or guidance do you have to provide?

COLLIN: So with corporate bonds specifically, we still really like investment grade corporate bonds. We've been talking about them for probably over two years now as a potential opportunity, but mainly because of where the yields are. Yes, spreads are low, but depending on the maturity breakdown that you're looking at, depending on the credit rating breakdown—with investment grade corporates, most of them are rated single A or BBB—but depending on that breakdown, you can probably get yields of around 4.5% or more. And we still find that attractive just based on, you know, again, where we were for the 10 years coming out of the financial crisis and then the early stages of the pandemic in 2020 and 2021—yields were much lower. So we think that's attractive.

Even though I talked about deteriorating fundamentals, we're less concerned, and I'm less concerned, about what that means for investment-grade-rated issuers. They have those investment grade credit ratings for a reason. Yes, maybe their prices decline a little bit relative to Treasuries if we were to see economic growth slow a little bit, but we're not worried that the investment grade issuers are suddenly going to see a wave of downgrades or struggle to remain current on their debt. So we're still comfortable there.

And another theme we've had for a while is a touch of caution on high-yield bonds. Because that's … when we talk about deteriorating fundamentals, it's really going to hit high-yield issuers the most. They have a lot of debt relative to their earnings. So just modest or small declines to their profits or kind of volatile cash flows can have a serious impact on their ability to pay their interest expenses and remain current on all their debt obligations.

And, you know, just to kind of wrap it up, we talked about how we have these deteriorating fundamentals, but no one seems to care because technicals remain strong. There's a lot of demand. Investors keep kind of going into this market. What I worry about is that technicals can only work for so long, meaning strong demand and investors going into these products to kind of support their prices. That can't necessarily offset bad things that might be happening below the surface. And if we see defaults kind of remain elevated—which they are relative to where we've been over the past five years—or even reaccelerate, strong demand can't mask that. Now, if there are defaults, that usually means some sort of price haircut or some long restructuring process, but that impacts the bonds. And if that continues, that should offset or can offset the strong demand we've seen from lot of investors. So that's our concern there.

So even though we are cautious on high yield, not saying investors need to get out. We just think you need to kind of be aware of the risks. And when you look at the yields they offer, close to, say, 6.5 or 7% on average, a lot of that really is just coming from the level of Treasury yields and not that risk premium. And we'd expect a lot of volatility going forward. So you need to be able to ride out those ups and downs and really just consider them in moderation.

KATHY: Yeah, it's one of the things that we tend to forget when markets are just kind of doing their thing and happy and rolling along. Volatility is low, and returns are good, and why rock the boat, right, and always a good time to kind of reassess those things.

I'm going to ask you about one more topic that we talked a lot about lately, and that's TIPS—so Treasury Inflation-Protected Securities. I think it's interesting. The real interest rate, or the interest rate implied in the TIPS market, is pretty good, 2%-ish or above. That is historically not a bad yield. That's the real yield that we derive from the TIPS market. And there's so many concerns about inflation right now and what's happening with the Fed and all that. What do you think here? Is there a case to be made for TIPS right now?

COLLIN: I think there is a case to be made for TIPS, but I think we need to put some caveats in there and explain what they are. So TIPS are … they're issued by the Treasury. They're backed by the full faith and credit of the U.S. government. The key difference is that their principal values are indexed to the Consumer Price Index. That's a measure of inflation. So as inflation rises, so too with the value of TIPS.

So let's say you buy a TIPS at auction or at issuance and has a par value of $1,000, and the CPI rose by 3% over the next 12 months. The value of your TIPS would rise 3% as well, and then it would continue to rise if inflation continues to rise. There's very few investments out there that give you that direct hedge or protection to inflation.

You mentioned the yields they offer. Those are real yields. So if you look at a yield on a TIPS, and they vary and they've come down a little bit lately. Now they're more in like the 1.5 to 2% area. That might look low, but any inflation would actually get added to that for our nominal return. So if you can get a five or 10-year TIPS somewhere in that 1.5 to 2% percent range, and you hold that TIPS to maturity, you would outperform inflation by that amount. So if you're … if you want to beat inflation, you can lock in a positive real rate of return with TIPS right now. And if inflation were to surprise to the upside, that inflation gets added to that total return, that yield that you see. So I think they can make sense. There's probably two cases for that.

One is just general kind of diversification, broad inflation protection. But for an investor who's really worried about inflation, and we know a lot of investors are—we know a lot of our clients at Schwab are really worried about inflation—then I think this can kind of allow you to sleep better at night knowing that the principal values will rise and fall with that inflation rate. So it can really help protect against those inflation shocks.

So we think they can make a lot of sense right now, especially if you're worried if inflation is going to go higher.

KATHY: Yeah, as always, I think when you're making any investment, particularly in the inner workings of the bond market, knowing what you own and what structure you're owning, it is really important to what the outcome is going to be. And that's just something to always keep in mind.

So this has been great, Collin. Always enjoy talking about the nitty gritty in the bond market with you. Looking forward to having you come back again soon.

COLLIN: Thank you, Kathy. It's always a pleasure.

LIZ ANN: So now is the time when we talk to each other about what we're paying attention to over the next week or so. So what's on your radar?

KATHY: Well, we have a Fed meeting that's quickly approaching. Now we don't get the usual summary of economic projections. We don't get a dot plot to keep us busy. But, you know, there's always the press conference, which will be interesting. And the statement, we'll see how the Fed characterizes the state of the economy. There's a lot of input from the regional Fed banks when they do that. 

And what we've heard is kind of a mixed bag, and that's been true for several months, where some businesses are indicating that things have stabilized after the initial concerns about tariffs, while others, I think, when I look at the regional surveys, are reflecting some of the softness, ongoing softness in housing, and the layoffs at the federal government level are affecting some of the districts as well. So it'll be interesting to see how, when they pull that all together, they characterize the economy, the outlook for inflation. We've had that uptick in inflation. I'll be interested to see the commentary.

And then, of course, I am sure Fed Chair Powell is not looking forward to this press conference, as he probably doesn't look forward to any of them anymore. But we'll be scrutinizing what he has to say to see if there's some hints of easing on the horizon.

One other thing we might get at this meeting is a dissent. We've already heard from Governor Waller that he thinks the Fed may be a little late in cutting rates. This is an interesting kind of shift for him. But he's focused on weakness in the private sector labor market and has been making the case for maybe starting to cut. So we'll see if that turns into a dissent in this.

Other than that, the usual round of economic data. What about you, Liz Ann?

LIZ ANN: I think you're right to think that a dissent might happen. And you mentioned that this meeting, because it's off the kind of calendar quarter Fed cycle, doesn't have the new release of summary of economic projections or the dot plot. We do get one in September, and I know I'm looking ahead. But I think for those that don't know what the dot plot is, it's each member's forecast of where the fed funds rate is going to be at different periods looking forward, and there's been a widening out there. So in advance maybe of the September meeting, just continuing to listen for maybe dispersion among Fed speakers on the committee.

I also … every time I say either the "Federal Market Committee" or just "committee," I want to remind people, in light of all of this pressure that Powell is likely feeling, is that the "C" in FOMC does stand for "committee" and not "chair." So that is, I guess, a bit of a saving grace as it relates to Fed independence. 

But we also get, over the next week and a half or so, we get the kind of dual packet of purchasing managers indexes. S&P Global has a version of them, as does Institute for Supply Management, or ISM, and they both have indexes for the manufacturing side of the economy and the non-manufacturing, or services side, of the economy. And they're real time. They're not subject to any meaningful revisions. So keeping an eye on those.

Unemployment claims, I think, continues to be important, especially if we continue to see a differential between initial unemployment claims and what's called continuing claims—people staying on unemployment insurance—and that is suggestive of this no-hiring, no-firing kind of backdrop where people who have been let go, it's taking a bit longer to find jobs.

Also speaking of jobs, we get the Job Openings and Labor Turnover Survey next week. We look at components of that, like job openings and the quits rate.

We also get Challenger, Gray & Christmas layoff announcements. There has not been a meaningful move up, although they are moving higher, to see whether we're yet at any kind of breaking point in that low hiring, low firing.

And then I think at the end of next week, we've got the jobs report too. So that's always a doozy in terms of attention grabbing. So that's what's on my radar.

KATHY: Yeah, I think those jobs reports are going to be really central to market action, certainly in the bond market as we go forward.

Well, that's it for us this week. Thanks for listening.

Remember that you can keep up with us in real time on social media. We both post regularly on X and LinkedIn. I'm @KathyJones—that's Kathy with a K—on X and LinkedIn.

LIZ ANN: And I'm @LizAnnSonders on X and LinkedIn. Those are the only platforms I am on. And even on those platforms, continue to have a rash of imposters. So please make sure you're following the actual me.

And you can read all of our written reports, most of which include lots of charts and graphs, at schwab.com/learn.

And if you've enjoyed the show, as always, we'd be so grateful if you would leave us a review on Apple Podcasts, a rating on Spotify, or feedback wherever you listen, or tell a friend about the show.

And finally, a quick programming note for next week—I will be out on vacation, but we're still recording an episode. So I'm excited, Kevin Gordon will very capably fill in for me. So it'll be the Kathy and Kevin show. I can't wait to listen, and I'm very grateful for Kevin to taking over my seat for a week.

For important disclosures, see the show notes or schwab.com/OnInvesting, where you can also find the transcript.