The fixed-income markets have been an interesting landscape for multiple themes to develop across numerous sectors, durations, and credit profiles. Momentum traders have been chasing the run higher in long-term Treasuries, while value-minded investors have been stalking the risk to reward setup in high yield, TIPs, or emerging market bonds.
Last week’s payroll report showed a confluence of factors that indicated the labor markets are in better shape than most expected. This initiated a sharp rise in interest rates as the bond market started to factor in expectations for a 2015 rate hike. A week ago, most participants dismissed the possibility of the Fed tampering with its fiscal policy this year. However, that changed virtually overnight as the economic data continues to point out a fairly solid employment picture.
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