High-yield bonds have been sold off alongside other risky assets this year, but investors should not treat them the same as leveraged loans. High-yield bonds have a different sector composition, with more exposure to energy and basic industries, potentially making them more resilient to market disruptions. While default rates for high-yield bonds and leveraged loans have converged recently, JPMorgan Chase expects the default rate for leveraged loans to rise faster than for high-yield bonds in the coming years.

US Treasury market activity remained muted at the start of the week, with yields holding small gains in thin trading due to European holidays and investor caution. The yield on two-year Treasuries held near 3.84%, while the 10-year yield hovered around 4.33%. Upcoming auctions of three-, 10-, and 30-year notes totaling $119 billion are in focus, particularly after lackluster demand in recent sales.

US stocks rose as investors monitored tensions in the Middle East, with the Dow Jones Industrial Average up 0.4%, the Nasdaq Composite up 0.5% and the S&P 500 up 0.4%. The Trump administration has proposed a 45-day cease-fire with Iran, but Iran has rejected the proposal, leading to escalating rhetoric from the president. Oil prices have risen, with US crude futures reaching $112.41 a barrel.

JPMorgan Chase CEO Jamie Dimon warns that losses for lenders exposed to highly indebted companies could be higher than expected due to weakening lending standards. In his annual letter to shareholders, Dimon cited aggressive assumptions about future performance, weaker covenants and increased use of payment-in-kind as examples of deteriorating standards. Dimon also discussed broader economic issues, noting the resilience of the US economy amid global uncertainties and potential shocks from geopolitical tensions.

The US Department of the Treasury has designated BNY Mellon as a financial agent, alongside Robinhood, to help build and operate "Trump Accounts," a new tax-advantaged savings program for children created under recent tax legislation. BNY will oversee initial account management, while Robinhood will support app development and customer experience through a white-label platform controlled by Treasury. The accounts, which can receive up to $1,000 in federal seed funding for eligible children, are designed to expand long-term savings and potentially serve as an entry point for lifelong customer relationships across the financial industry.

Bank of America, Citadel Securities and Goldman Sachs have expressed support for the Options Clearing Corp.'s proposal to change the methodology for contributions to the default fund, saying the proposal would more fairly allocate risk charges and ensure stability during market stress. However, retail brokers such as Robinhood Markets and Charles Schwab have opposed the proposal, citing a potential increase in costs.

Federal Reserve Bank of Cleveland President Beth Hammack and Federal Reserve Bank of Chicago President Austan Goolsbee have expressed concerns about inflation, with Hammack noting that inflation has been above target for five years and has recently been stagnant. While Hammack views the labor market as stable, Goolsbee is more cautious, citing low hiring and firing rates amid ongoing uncertainty.