The market seems to believe that any potential contagion from the situation in the Ukraine or economic weakness in China will be extremely limited in the United States.
Strong job growth sent Treasury rates upward, but corporate credit spreads held steady on a flood of new issues.
The corporate bond index will struggle to return more than the 2% it already has this year given the likelihood of rising long-term rates and today's historically low credit spreads.
The impact from the emerging-markets disruption barely dented the corporate bond market.
Headline payrolls numbers disappointed last week, but the bond markets rallied on underlying private-sector strength
At this point, the instability appears to be contained in relatively small geographic regions.
We continue to view credit spreads as fairly valued, albeit at the tight end of the range that we see as appropriate, given our economic outlook.
Corporate bond trading activity was relatively light as many investors decided to wait for the calendar to build this week as reporting season ramps up.
It was back to the grind last week as traders and portfolio managers returned to their desks after the holidays for the first full trading week of the year.
From a fundamental viewpoint, while credit spreads may continue to grind tighter in the short term, we think the preponderance of credit spread tightening has run its course.
The corporate bond market will probably struggle to return much above break-even in 2014.
Corporate bonds reacted positively last week to the Fed's assurances that it will keep its key interest rate lower for longer.
But from a fundamental viewpoint, we think the preponderance of credit spread tightening has run its course.
It appears that the corporate-bond market believes Friday's jobs report was high enough to suggest an advancing economy, but not so strong as to prompt a Fed taper.
So long as the Fed's asset-purchase program is running full speed ahead, it will provide a ceiling on how much long-term rates can rise and will help push credit spreads tighter over time.
After suffering from the sharp increase in interest rates and widening credit spreads this summer, investors are hesitant to pay tighter credit spreads for longer-dated corporate bonds.
Stronger-than-expected economic indicators prompted investors to rethink when the Federal Reserve may begin to taper its asset-purchase program.
So long as the Fed continues its asset-purchase program at the current run rate, we don't expect interest rates to rise meaningfully and think they will remain range-bound.
The demand for corporate bonds should push corporate credit spreads tighter, says Morningstar's Dave Sekera.
With the government back to work and the debt ceiling suspended, the political rhetoric emanating from Washington will subside and allow investors to concentrate on third-quarter earnings and fourth-quarter forecasts.
The buy-the-dip mentality is alive and well as portfolio managers are for the most part ignoring the political antics, trying their best to pretend it's not happening.
Interest rates have declined since the Fed announced it was holding its bond-buying program steady and will probably continue to trend lower in the near term.
Rising interest rates have taken their toll, but as the Fed delays dialing back on stimulus, investors are poised to recapture some of their losses.
If the FOMC does not make a change in policy at its next meeting, the committee's credibility will erode further, but it's also possible a taper might not happen until March.
But that tone could be put to the test based on the FOMC's taper/no taper decision this week.
Portfolio managers are hoarding their cash balances as they keep powder dry to participate in Verizon's massive upcoming debt issuance following its buyout of Vodafone's wireless stake.
Although recently released economic indicators are pointing to sluggish growth, those metrics have not been weak enough to dissuade the FOMC from tapering.
As the 10-year Treasury approaches 3%, the pace at which interest rates are rising will slow, but the Fed could begin to taper its bond-buying program after its September meeting.
Corporates are likely to struggle during the next few months as investors attempt to anticipate when and how quickly the Fed will taper its asset purchases and the subsequent bond market reaction, says Morningstar's Dave Sekera.
We are seeing an increase in idiosyncratic catalysts that are specific to an individual issuer as opposed to industry factors that affect an entire sector.
Interest rates have generally been on an uptrend since the beginning of May, and idiosyncratic risk seems to be rising from increased shareholder activism and aggressive share-buyback programs.
Many issuers have increased 2013 outlooks as sequestration has not had as meaningful an impact as it might have.
Although financial reports continue to show that companies are struggling to increase the top line, they have still generally been able to meet earnings expectations.
In addition to the strength or weakness of economic and unemployment metrics in the second half of this year, technical factors in the bond market may force the Fed's hand to begin tapering.
As the markets continued their rapid decline, the Federal Reserve sought to stem the flow of blood on Wall Street.
Widening investment-grade credit spreads and rising interest rates lead to losses.
Corporate bonds suffered a double whammy as interest rates rose and credit spreads widened.
As soon as the employment number was released Friday morning, everyone immediately became a buyer of corporate bonds.
Interest rates have begun to rise as the market is pricing in an increasing probability that the Fed may begin to taper off its asset-purchase program within the next few months.
We think last week's focus on the Fed's intentions calls into question just how much of the recent rally has been due to improving underlying fundamentals.
Things are slowly improving in the bond market, but many of the issues in Europe that underlie the sovereign debt crisis remain unresolved.
The tale continues to be all about the Federal Reserve and its ongoing quantitative easing program.
Apple's bond issue indicates to us that the depth of demand for corporate bonds could very well support megasize strategic mergers that were unthinkable only a few months ago.
The longer that interest rates and credit spreads continue to generate historically low all-in yields, the more asset managers will stray from their traditional investment allocations.
Commentary on earnings calls suggests that economic activity in Europe continues to slow and the pace of consumer spending in the U.S. has decelerated in April.
The corporate bond market has been skeptical of the equity market's relentless march higher, but it appears that credit investors finally capitulated.
While credit spreads may tighten modestly, over the longer term the preponderance of credit spread tightening has run its course, says Morningstar's Dave Sekera.
Spreads are widening among European-bank bonds, while holders of Cypriot bonds are now at a greater risk of impairment in future bailouts.
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