Page 496 - DCAC Feb 2026 Files

An Anatomy of the U.S. Fixed

Income Market

Wyck Brown, CFA, MBA Natalie Miller, CFA, M.S.
Vice President Associate Consultant

Fixed Income Powers the Economy
Fixed income may not grab headlines like equities, but it’s the bedrock of the
U.S. financial system. With over $73 trillion in outstanding debt, on par with
U.S. equities by market cap, the fixed income market fuels everything from local
infrastructure to corporate expansion and the federal government’s operations. In
today’s environment, with 10-year Treasury yields around 4.0%, fixed income offers
compelling risk-adjusted returns.
Fixed income serves multiple roles: it’s the risk-free benchmark (Treasuries),
a stable funding source (municipals and agencies), a driver of credit creation
(corporates and structured products), and increasingly a private alternative
to traditional banking (direct lending).
As part of this article, we have supplied an overview, in table format, of the
various segments of the fixed income markets with associated outstanding
balances, annual issuance, and various valuation metrics such as yield, spread,
duration, convexity, etc., to give the reader a sense of the relative sizes and
valuation aspects of fixed income sectors.

A couple of observations, for instance, would be:
1. The overall tradable fixed income market is roughly equal to the
tradable equity market at $73 trillion, with over half of that being federal
government debt.
2. Despite the diversity in credit rating categories, the corporate bond
market is dominated in size by bonds in the “A” or “BBB” rating
categories, as these two rating categories make up about 70% of the
entire corporate bond market. What about the Agg?
3. Despite the damage caused to the structured finance sector by the GFC, Most fixed income investors are familiar with the Bloomberg U.S. Aggregate
it is still about the same size as the corporate bond market, at around Index, or ‘the Agg.’ The Agg is the most widely used U.S. fixed income market
$15 trillion. benchmark. However, it does not provide a comprehensive view of the U.S. fixed

4. Private credit is becoming a substantial market as it approached $2 income markets. In fact, it represents less than half of the fixed-income universe
trillion in outstanding balance. by market value. Additionally, a large portion of the Agg is highly rated and
government guaranteed.

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